Nancy Pelosi, in a statement just now, said Democrats will support the House GOP plan to pass a stand-alone extension of the payroll tax cut without paying for it:
“The House Republican leadership plans to bring to the floor a stand-alone payroll tax cut extension bill tomorrow. We have long proposed bringing this tax cut to the floor without payfors and House Democrats will support it so that taxes are not raised on 160 million working Americans, but this should not be a substitute for the work of the Conference Committee.
“We continue to call upon the conferees to resolve the remaining issues — extending unemployment benefits and ensuring seniors can continue to see their doctors under Medicare — by February 17. If the Conference Committee is unable to complete its work on a comprehensive bill by that date, the Republican leadership should cancel the recess and remain in Washington next week. These crucial policies affect millions of middle class families and seniors and must not expire at the end of this month.”
So House Democrats will vote for the GOP plan to extend the payroll tax cut independent of what happens to unemployment benefits and the Medicare patch, which will now be negotiated separately.
The question now: Who has the leverage heading into the talks over unemployment and Medicare? While the House GOP decision to vote on an unfunded payroll tax cut extension was a big concession, there’s a school of thought that Republicans are now in a better spot than they were. Dems no longer have the leverage they previously enjoyed when the payroll tax cut extension was unresolved; now Republicans can now hold out for more concessions on unemployment. They want states to be able to force unemployment beneficiaries to undergo drug testing and have a GED requirement, which Dems have rejected.
What’s more, with House Dems now on board, House conservatives who were balking at extending the tax cut no longer have to vote for it (many previously supported a one-year extension, which was a nonstarter in the Senate, giving them cover to vote No now). That lessens the pressure on the House GOP leadership to keep the caucus unified.
Still, one GOP aide I spoke to this afternoon says it’s unclear who has the leverage going into the battle over unemployment. After all, the fact that the public holds the GOP more responsible for gridlock in theory puts Republicans at a political disadvantage, and last year’s payroll tax cut debacle left Dems with the moral high ground.
So: The bad thing is that the fate of millions of unemployed Americans hangs in the balance, and there’s still a battle ahead. The good thing is that we now know that the payroll tax cut extension will all but certainly pass. That’s a big plus for 160 million working Americans and helps the prospects of the recovery.
UPDATE: Politico reports that a deal is near to extend both the payroll tax cut and unemployment insurance. A Dem aide cautions me that this may be “premature,” though a deal could happen this afternoon.