As Congressional leaders publicly duke it out over the extension of a payroll tax holiday, concern is growing behind closed doors over an expiring measure that could be even more politically explosive: unemployment benefits.

The optics of letting unemployment insurance fall to the wayside could be just as troublesome — if not more so — for both parties as the expiration of what amounts to a $1,000 tax break for about 160 million American workers.

But the path forward on jobless benefits is hardly clear. Many Republicans in both chambers are pushing for at least some tweaking of the current system. Others still are seeking a more comprehensive overhaul of the package, while a handful would be content to simply extend the current law. Both parties are concerned about how to pay for the benefits while also paying for a litany of other sun-
setting bills, from tax extenders to the Medicare “doc fix” and the payroll tax cut.

With unemployment hovering around 9 percent and the holidays approaching, both parties seem to be in a holding pattern waiting for the other chess players to make their moves before divulging the entirety of their strategies — or at least strategies that actually chart a course toward compromise.

“Members at every level are talking all the time, but right now there’s not a sense yet of a real path forward,” one Senate Democratic aide said.

On Tuesday, Senate Majority Leader Harry Reid (D-Nev.) stressed the urgency of getting unemployment benefits extended, threatening to keep his Members in Washington, D.C., until Christmas if that’s what it takes to reach a deal.

“The jobless benefits, we have to do that. It’s really important. There are two things that will really hurt the economy if we don’t do them, extending the payroll tax cuts and extending the unemployment compensation,” Reid said.

As part of their big, bundled year-end offering, House Republicans are planning to include a reform of the system that would essentially give grants to states. Such a move could give states leeway to use the money intended to go to unemployed workers to pay back overall budget deficits. While Democrats would undoubtedly balk at such a measure, any one Republican Senator, such as South Carolinian Jim DeMint, could block a bill that doesn’t include those kinds of
changes to the program.

Asked whether he would block a straight extension of current jobless benefits, DeMint said he would wait to see how the Senate proceeded on the measure, but that he would certainly vote against it.

“The current form is a mess. It’s really being counterproductive. It’s discouraging people who can go back to work from going to work,” DeMint said. “So any extension needs to be paid for, but the program needs to be reformed to encourage people to get off it instead of encouraging them to stay on it. So we were looking at reforms of the program.”

DeMint had planned to hold a press conference last week to discuss a potential filibuster of the extension without reforms to the program, but he shifted course when “we realized that the House was going to take action first.”

Additionally, Sen. Tom Harkin (Iowa) last week warned that he and other concerned Democrats would not let the Senate adjourn for the year without extending current law.

House action might end up bringing more controversy to a debate on which most Members have yet to focus.

The House Republican caucus will meet today to discuss the endgame for next week, but the Conference has not rallied behind any plan and floor action likely won’t occur until next week.

Pieces of Ways and Means Chairman Dave Camp’s (R-Mich.) unemployment insurance reform proposal, which gave more autonomy to the states, will likely be included in the package, but Democrats say it is a non-starter. Other sources suggested there is not enough time for a major overhaul of the system.

“I think it’s a serious mistake to try to revive it,” Rep. Sander Levin (D-Mich.), ranking member of the tax panel, said Tuesday. “It would essentially ruin the unemployment structure.”

Levin, who was one of three leaders to speak at a Democratic Conference meeting Tuesday about Congress’ end-of-year work, warned, “Many of us won’t leave here for the holidays unless unemployment insurance is renewed. I don’t think they can stand the heat we’ll be offering.”

Democrats attacked Camp’s plan in May, after the Ways and Means Committee approved it along party lines. Just as Democrats vilified Budget Chairman Paul Ryan’s (R-Wis.) plan by asserting it would end entitlement programs, they similarly railed against Camp’s proposal to allow states to use federal unemployment dollars for other priorities, such as job training programs or to pay back federal loans.

Democratic aides acknowledged that party members would likely stage yet another attack if Republicans seek to, in their view, roll back the disbursement of jobless benefits to unemployed workers.

Republicans, however, maintain it’s appropriate to consider unemployment insurance reforms now that the program is up for renewal.

“This reform provides us an opportunity to advance good policy,” a GOP aide said. “And it’s good politics because we are still extending the program, but we’re reforming it to make it more efficient and effective.”

Even if changes are included in a package, Republicans caution it won’t be enough to get conservatives on board to vote for the payroll tax cut. More likely, the sweetener will relate to the doc fix to cover the shortfall in Medicare payments to providers.

Rep. Phil Gingrey (R-Ga.), a co-chairman of the Doctors Caucus, said the 21-member group wants a two-year fix that’s fully offset.

“I don’t know how bad [GOP leaders] need those votes, but I thought we really needed to let leadership know that doctors are getting so tired of being jerked around all the time,” Gingrey said. Asked whether including the doc fix would help increase GOP votes, Gingrey said, “I think it will help, I definitely think it will help.”