In the tax-holiday debate, Democrats are largely united, while many rank-and-file Republicans are resisting overtures from their leaders to support the extension. The unusual dynamic of GOP discord over lower taxes has given Obama and his party a degree of political momentum they have been lacking since the 2010 elections.
“Our proposal would create jobs, put more money in the pockets of the middle class and working families, and theirs would in effect take those benefits away,” Senate Majority Leader Harry M. Reid (D-Nev.) said last week.
On Sunday, Democrats said Reid would make a new offer, perhaps Monday, to provide offsetting savings from a tax benefit that some economists say adds an extra 1 percent to economic output. House Speaker John A. Boehner (R-Ohio) is likely to offer his own proposal this week, setting up potentially dueling votes over the proposals by week’s end.
Reid and Boehner are probably headed for a final negotiation on the payroll tax that will initiate a two-track process for the legislation, which the leaders say must pass before Christmas. Along with the tax holiday, leaders are considering attaching an extension of unemployment insurance benefits and a measure to adjust Medicare payments to doctors — all of which, according to Boehner, will need accompanying spending cuts to make the package deficit-neutral.
In addition, Congress has until Dec. 16 to iron out the final pieces of a spending blueprint for roughly two-thirds of the federal government, a huge package that sets federal agency budgets at $1.043 trillion for 2012.
In a largely overlooked statement last week, Boehner acknowledged that after two straight years of spending reductions, those agency budgets are pretty lean.
“We’ve done most of what can be done,” he told reporters Thursday, suggesting that any further long-term deficit savings must come from changes in the tax code and entitlement programs.
Both sides on Capitol Hill are expressing optimism that the spending plan is on track for bipartisan approval, but the White House late last week issued several veto threats if Republicans insert policy provisions in the bills, such as funding restrictions on the new health-care law.
“If congressional Republicans want to avoid a veto and are serious about avoiding a costly government shutdown and preventing the uncertainty that a shutdown would bring to our markets and our economy, they will stop attempting to re-litigate the August agreement and abandon ideological stunts,” Dan Pfeiffer, Obama’s communications director, wrote on the White House blog.