That negotiation, lawmakers and aides said, also could be headed toward an agreement, with lawmakers considering extending the $120 billion tax break for two months to buy more time to determine how they offset the benefit’s cost so it does not add to the federal deficit.
The White House initially had pushed Congress to delay the spending plan until the issue of the payroll tax was resolved, a move that raised the specter of a government shutdown and threatened to increase workers’ withholding tax at the start of the new year.
Linking the two measures only complicated the negotiations, however, and Republicans did not give in to Obama’s demands on how to set up the payroll tax provision. With the holiday season upon them, some aides suggested that lawmakers’ exhaustion and eagerness to leave the embattled Capitol for several weeks served as key factors in reaching the deals. Next year’s session will begin in late January.
“In spite of many unnecessary obstacles, it is good to see that responsible leadership and good governance can triumph,” House Appropriations Chairman Harold Rogers (R-Ky.) said Thursday night, referring to the spending plan.
The legislation will provide the full funding for the rest of fiscal 2012 for most of the government, including the Pentagon, the Education Department and the Environmental Protection Agency.
Now that the spending deal has been clinched — votes are expected in both chambers Friday — the payroll tax issue remains the last fight for the acrimonious first session of the 112th Congress, one that has been marked by repeated brinkmanship.
After several days of trading blame on both issues, there was a broad shift in tone Thursday morning in negotiations on the tax plan. Senate Majority Leader Harry M. Reid (D-Nev.) predicted the impasse would be resolved soon. And House Speaker John A. Boehner (R-Ohio) told everyone to “step back and take a deep breath.”
“I think there’s an easy way to untangle all of this,” Boehner said. “We just need to let the members do their jobs, and we need to let the two institutions do their work.”
Talks on the payroll tax holiday lasted deep into Thursday night. They had picked up steam 24 hours earlier, when Democrats dropped their demand that the cut be paid for with a new surtax on those who earn more than $1 million a year.
“Yeah, that’s gone,” Senate Finance Committee Chairman Max Baucus (D-Mont.) confirmed Thursday evening. Baucus, who is negotiating the tax package for Democrats, continued pushing to complete a year-long extension of the payroll tax provision, coupled with extended unemployment benefits and an important tweak to the Medicare reimbursement rate for doctors.