Speaker of the House John Boehner leaves at the end of a media availability Dec. 20 in Washington. (Alex Wong/GETTY IMAGES)

The debate over the payroll tax has gotten, well, weird. House Republicans are accusing Senate Democrats of preferring a two-month payroll tax deal to a one-year payroll tax deal. The negotiations appear to have collapsed over something called "conference committee." The Wall Street Journal editorial board has turned against Boehner.

As I said: Weird.

The beginning of clarity on this is to realize that it's not about the payroll tax. If Republicans wanted a clean, one-year extension of the payroll tax, they could get the vote of every Democrat in the House and Senate and this would be done tomorrow.

Rather, this is about finding agreement on two things: the policy concessions that House Republicans will accept as payment for the payroll tax cut, and a process that House Republicans will accept as legitimate in securing those concessions. And that’s why the conference committee idea matters.

Remember what everyone thought was happening here: Mitch McConnell was negotiating with Harry Reid on behalf of Senate and House Republicans. Those negotiations were successful. Almost every Senate Republican voted for the resulting bill. Boehner went to sell that bill to his members. But then the House Republicans rejected it, and we were back at square one.

The Boehner office is arguing that the right way to negotiate this compromise -- perhaps the only way to do it -- is a "conference committee." The two parties from the two chambers appoint negotiators to sit in a room and work out a deal. "A formal House-Senate conference committee can resolve the differences between our yearlong tax cut extension and Democrats’ short-term bill," Boehner said in a statement. He went on to appoint Reps. Dave Camp, Fred Upton, Greg Walden, Tom Price, Kevin Brady, Renee Ellmers, Nan Hayworth and Tom Reed as the negotiators for the House Republicans.

Boehner's choice of a conference committee is an interesting one. As congressional scholar Sarah Binder writes, conference committees have become rarer as party leaderships have become stronger. In 2008, Donald Wolfensberger, a former Republican staff director of the House Rules Committee, wrote an article for Roll Call asking, "have House-Senate conference committees gone the way of the dodo?" He concluded that they weren't quite extinct, but they were definitely endangered.

There's a long list of reasons behind the decline on conference committees, and Binder gets into them here. What her analysis implies is that insisting on a conference committee serves three purposes for Boehner. First, it offloads the compromises on a coalition of negotiators who come from different wings of the House Republicans. That protects Boehner in the final agreement. Second, it creates a procedural argument that distracts from the underlying disagreement: House Republicans won't want to extend the payroll tax cut except in the absence of extraordinary policy concessions, like the immediate greenlighting of the Keystone XL oil pipeline. Third, it lets Boehner spend some time standing up to the Senate and the president who are trying to rush a compromise through the House -- a move that perhaps gives him some political capital he can spend on the ultimate compromise, as he'll have proven to House Republicans that he didn't capitulate at the first sign of pressure.

Nevertheless, as Binder says, "if the party’s key priority is securing swift agreement on a full year extension of the payroll tax cut, going to conference is a particularly inefficient way to go about it."

Top stories

1) There's still no payroll tax deal, report Rosalind Helderman and Paul Kane: "The House is gone, mostly. The Senate vows not to return. And President Obama is home in Washington while his family vacations in Hawaii, hoping for some kind of agreement between the two that he can sign. That was the uneasy state of play Tuesday after a year of acrimony and stalemate came to a head on Capitol Hill, leaving millions of American workers facing a tax increase in two weeks. The House voted on Tuesday to reject a Senate compromise that would have extended a federal payroll tax holiday for two months, continued unemployment benefits for the long-term jobless and averted a cut in the reimbursement rate for doctors who treat Medicare patients."

2) Millions could lose jobless benefits, reports Robert Pear: "More than three million people stand to lose unemployment insurance benefits in the near future because of an impasse in Congress over how to extend the aid and how to offset the cost. Jobless benefits have been overshadowed by debate on a payroll tax cut, but have become a huge sticking point in negotiations on a bill that deals with both issues. Republicans would continue aid for some of the unemployed, but would sharply reduce the maximum duration of benefits and impose strict new requirements on people seeking or receiving aid. Democrats said these changes made no sense at a time when 45 percent of jobless workers had been unemployed for more than half a year and the average duration of unemployment -- 41 weeks -- was higher than at any time in 60 years."

3) The proposed payroll tax deal's pay-for is under fire, reports Nick Timiraos: "Washington's latest push to fund a payroll-tax cut extension via Fannie Mae and Freddie Mac isn't sitting well with the firms' regulator and others who say it will complicate any overhaul of the failed mortgage-finance companies. The Senate on Saturday passed a measure that would pay for a two-month extension of the tax cut by raising fees that Fannie and Freddie charge lenders. The firms would collect those fees over 10 years to cover the cost of extending the tax cut. Republicans in the House of Representatives oppose the Senate's latest tax-cut extension, which passed on an 89-10 vote, but last week approved their own version that would also hike the mortgage fees...But the provision threatens to complicate the job of Fannie and Freddie's regulator, which is tasked with conserving the firms' assets."

4) The Fed has proposed new bank rules, report Brady Dennis and Neil Irwin: "The Federal Reserve unveiled proposed regulations Tuesday aimed at keeping the nation’s largest banks from taking the kinds of risks that triggered the U.S. financial crisis and from tying their fate so closely to that of other firms. The 173-page proposal includes far-reaching and detailed provisions, including how much money banks must hold to guard against losses, requirements for better risk management and how much the firms are allowed to transact with individual trading partners. The new measures, mandated by the Dodd-Frank financial overhaul legislation enacted last year, are intended to apply to all U.S. bank holding companies with $50 billion or more in assets, as well as any non-bank firms that regulators deem to be 'systemically important.'"

Top op-eds

1) Plenty of liberals agree with Gingrich about judges' power, writes Eric Posner: "Gingrich enjoys another set of surprising allies, though these people probably would disclaim the allegiance: a group of mostly liberal law professors who have criticized judicial supremacy and have tried to resurrect various forms of popular sovereignty. These professors include Larry Kramer, the dean at Stanford Law School; Mark Tushnet, a professor at Harvard Law School; Jeremy Waldron, a legal philosopher at NYU; and Cass Sunstein, a Harvard professor who currently holds a high-level position in the Obama administration...First, judicial supremacy is inconsistent with democratic values...Second, judges make errors, and are not very good at making policy or understanding public opinion...In other advanced democracies, things work differently. Governments can correct judicial interpretations."

2) We need more stable tax policy, writes John Taylor: "Like the one-time rebate of 2001, the temporary tax cut of 2008, the cash-for-clunkers and stimulus payments of 2009, or similar policies tried back in the 1970s, these temporary policies consistently fail to stimulate sustainable recoveries...According to the Joint Committee on Taxation, the payroll tax cut is only one of 84 tax provisions expiring this year, about the same as in 2009 and in 2010. This is 10 times greater than the number of provisions that expired in 1999. As shown in a paper presented this October by economists Scott Baker and Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago Booth School of Business, this increase in policy uncertainty is one of the factors slowing economic growth."

3) All the public money currently spent on higher ed could be used to make college free, writes Mike Konczal: "Now what are the costs of how we subsidize higher education through the tax code? There’s already the $1.4 [billion] from the interest exemption. Also from subsidyscope, there’s the exclusion of employer-provided educational assistance ($1.1 billion), exclusion of interest on student-loan bonds ($0.6 billion), exclusion of scholarship and fellowship income ($3.0 billion), exclusion of tax on earnings of qualified tuition programs: savings account programs ($0.6 billion), the HOPE tax credit ($5.4 billion), the Lifetime Learning tax credit ($5.5 billion), parental personal exemption for students age 19 or over($3.4 billion), and state prepaid tuition plans ($1.75 billion)...That’s $22.75 billion we are paying through the tax code to make college tuition and student debt more manageable. This amount is in the middle the range of the cost of just making public high education free."

4) Newt wants to fix the judiciary, but it's Congress that needs reform, writes Harold Meyerson: "The rehabilitation of the U.S. government needs to focus on those broken branches that are supposed to ensure majority rule -- the presidency and the legislature. The Senate has become so burdened by rules enabling filibusters and anonymous holds that it embodies minority blockage more than majority rule. Our staggered schedule of federal elections means that lawmakers are often put in office by a much smaller and less representative electorate than the one that turns out in presidential-election years. The current House and Senate (save only those senators elected in 2008) have a mandate from a radically smaller majority (2006, 2010) than the one that put Barack Obama in the White House. By discarding the filibuster and senatorial holds, and by making House and Senate tenures conterminous with the president’s, we can regain majority rule."

Cover song interlude: Ben Gibbard plays "Indian Summer" by Beat Happening.

Got tips, additions, or comments? E-mail me.

Still to come: The housing sector is bouncing back; Congress didn't pass a doc fix before leaving; we could be in need of more immigrants to boost growth; Interior is weighing a big wind project; and the year in viral videos.


Housing is bouncing back, reports Neil Irwin: "The deeply depressed housing sector finally seems to have found its bottom -- and may even be starting to bounce back. A wide range of housing indicators -- construction, home sales, prices -- have stabilized in the past few months, although they remain at historically very low levels. And it looks as if construction activity in particular will pick up in 2012. The latest evidence of the momentum -- new-housing starts for November -- was released Tuesday. The surprising 9.3 percent gain bumped the rate of new-housing construction to its highest level in 19 months, to a rate of 685,000 new units a year. The number of building permits issued for new houses and apartments also rose, to 5.7 percent in November...Behind this improvement was a combination of powerful demographic trends...and the half-decade in which very few homes were built or renovated."

The IMF says Ireland could be falling off the wagon, reports Howard Schneider: "Ireland’s lauded rescue program is at risk of falling off track as a slowing European economy cuts into the country’s exports and sparks concern about the nation’s banking system, the International Monetary Fund reported Tuesday. While praising Irish officials for meeting budget targets and reviving the Irish economy, the fund said that the country’s program is nevertheless in a 'fragile' state. The slowdown in the rest of Europe, particularly in key trading partners such as Britain, means that economic growth for next year probably will fall to 1 percent, half of what was estimated. Exports, critical to the small country’s success, are declining. And the weight of outstanding bank debt is making it hard for Ireland to meet the financial targets laid out under the joint IMF-European Union rescue program, which has been a by-the-book success."

California is suing Fannie and Freddie, report Nick Timiraos and Ruth Simon: "California Attorney General Kamala D. Harris filed suit against Fannie Mae and Freddie Mac on Tuesday, seeking to force the firms to answer a detailed list of questions after the firms' federal regulator sought to block an open-ended inquiry by the state. The lawsuits, filed in San Francisco County Superior Court, are the latest salvo by Ms. Harris against the mortgage-finance giants and their regulator, the Federal Housing Finance Agency. Last month, the office issued subpoenas asking the firms to provide extensive answers to a range of questions about the mortgages they purchased and the foreclosed properties they own in California. The FHFA earlier this month said it had directed Fannie and Freddie not to comply with the subpoenas, calling them 'frequently vague and ambiguous,' and asked the attorney general to withdraw them."

New York needs more than finance, writes Edward Glaeser: "New York reaped enormous benefits from financial services, whose taxes paid for city services. The financiers’ ability to pay top dollar for Manhattan’s urban pleasures led to a proliferation of high-end retail, from restaurants to shoe stores, where employment increased by more than 20 percent from 1998 to 2007. But when one industry succeeds, others are crowded out. The number of housing units in Manhattan increased by about 6 percent from 2000 to 2010, but that wasn’t enough to keep up with demand. I began worrying in 2005, as helpful as finance had been for the city, New York might be getting too much of a good thing...The city is better off with finance than without it, no matter what you may have heard in Zuccotti Park. Yet New York would be stronger still if it had a broader industrial portfolio."

Ingenuity interlude: A kid uses a Nerf Gun to remove a loose tooth.

Health Care

Congress hasn't passed a doc fix in time, reports Julian Pecquet: "Patient advocates immediately started blasting Congress on Tuesday after House Republicans nixed a temporary fix to Medicare payments to physicians. The House voted 229-193 to reject the Senate's two-month 'doc fix' and instead call for a conference meeting with the Senate. Senate Majority Leader Harry Reid (D-Nev.) says the Senate is done for the year. If neither chamber changes its mind, physicians will see a 27.4 percent cut in Medicare payments starting Jan. 1...The federal Medicare agency told doctors on Monday that it would hold their claims for 10 business days while waiting for Congress to avert the looming payment cut. If no agreement is reached by then, the cut will go into effect and Medicare would have to repay doctors retroactively once Congress makes a decision."

The right is giving Paul Ryan's latest Medicare plan a pass, report Jennifer Haberkorn and David Nather: "House Budget Committee Chairman Paul Ryan made his Republican colleagues vote on a risky Medicare overhaul plan this spring only to release a new, dialed-back plan with Sen. Ron Wyden last week. But he doesn’t seem to have been hurt by his change of direction. In fact, Ryan’s political standing among Republicans may be stronger now than it was before -- because he has demonstrated he can reach beyond the GOP base and broaden the appeal of a conservative, market-based approach to health care. It’s not that the Wisconsin Republican has Democrats flocking to back his new plan, which is another version of Medicare 'premium support,' a model that would convert the program into subsidies to help seniors buy private health insurance plans. So far, Wyden appears to be largely alone."

Maybe Congress shouldn't extend the doc fix, writes Sarah Kliff: "The latest doc fix is set to run out at the end of the year; a new one is caught up in the debate over over the payroll tax extension. But even so, the working assumption is that doctors’ salaries will remain steady. The federal government will even hold off on processing claims for the first 10 days in January, just to make sure Congress has enough time to get its act together and pass their pay raise. Should they? American doctors are among the highest paid medical professionals in the world, as well as top-earners domestically...We pay more for doctors, but we don’t necessarily get better health outcomes. That same Commonwealth Fund survey found that the United States lagged on a number of health-care measures, from how long patients wait to see a specialist to life expectancy."

Domestic Policy

A lack of immigrants could be hurting growth, reports Josh Boak: "Congress could be hampering economic growth by moving slowly on immigration reform. Illegal border crossings may grab the headlines, but the entrepreneurial spirit of foreign-born graduate students has become essential for job creation. Of the 50 top firms that received venture capital backing in the past three years, 46 percent include at least one immigrant founder, according to a report released Tuesday by the National Foundation for American Policy...Each of the companies analyzed is privately held and valued at less than $1 billion, making them candidates to become publicly traded entities. On average, the 23 companies started by an immigrant that were profiled in the report employ 150 workers. Separately, 74 percent of all the companies surveyed have at least one immigrant working in management or product development."

State governments are getting more polarized too, writes Peter Orszag: "As Nathaniel Birkhead, a graduate student in political science at Indiana University, has written, 'If polarization is driven primarily by forces within the Beltway, we should expect to see that the trend of polarization in Congress differs from polarization trends elsewhere.'
So what’s been happening to state legislatures? From 1996 to 2008, most states experienced striking increases in state- level polarization, according to data assembled by the political scientists Boris Shor of the University of Chicago and Nolan McCarty of Princeton. In fact, over that period, most state legislatures polarized even more rapidly than Congress did...As I wrote in an earlier column, there is evidence that the population itself is polarizing."

Year in review interlude: Videogum's supercut of the year in viral videos.


Interior is near a decision on a huge proposed wind project, reports Andrew Restuccia: "The Interior Department said Tuesday it is moving toward a decision on a massive proposed transmission project that would carry electricity produced at offshore wind farms to states along the Atlantic Coast. Interior’s Bureau of Ocean Energy Management (BOEM) announced that it is taking public comment on Atlantic Grid Holdings LLC’s proposed Atlantic Wind Connection. The project would involve building high-powered transmission lines to carry electricity from offshore wind facilities to mid-Atlantic states like New Jersey, Maryland and Virginia. Industry groups see the project as important to developing the country’s burgeoning offshore wind sector, which has struggled to gain a foothold in the United States."

Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.