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Reid ‘Ruling Nothing Out’ on Payroll Tax

After a meeting at the White House with President Barack Obama this morning, Senate Majority Leader Harry Reid (D-Nev.) said Democrats are open to using spending cuts to offset the cost of extending a payroll tax holiday.

Democratic and Republican leaders have been haggling all week, not over whether to extend the temporary tax breaks, but over how to pay for them. Democrats have tried and failed to approve various forms of a millionaire surtax, while Republicans proposed enacting a three-year federal workers pay freeze and federal employee attrition.

Since the failure of the deficit reduction super committee last month, Democrats had expressed an unwillingness to rely on a spending-cut only approach.

But Reid appeared to shift course today. “We’re ruling nothing out,” Reid told reporters when asked whether he would be open to paying for a payroll tax holiday extension with spending cuts.

After a Democratic leadership press conference this afternoon, Senate Majority Whip Dick Durbin (D-Ill.) clarified that leaders are looking at spending cuts considered by the super committee and the a group helmed by Vice President Joseph Biden as a potential common-ground starting point. He said Reid and Obama have been steadfast in rejecting deeper domestic discretionary cuts suggested by Republicans. Congress already has slashed more than $1 trillion in domestic discretionary spending through August’s Budget Control Act.

Regardless of the shape of a final agreement — which likely will include the extensions of the payroll tax holiday, unemployment benefits and the Medicare “doc fix” — the pressure is mounting on all parties to act before the holiday recess. Reid and Durbin said Obama indicated to leaders he would not leave for his annual holiday trip to Hawaii until a deal was struck.

“‘Michelle and the girls can have a great time in Hawaii without me being there,’” Obama told the top four Senate Democrats in their morning meeting, according to Reid.

“The House would leave at its political peril,” Durbin added of the president’s message.

On all three of the major expiring provisions, Democrats are pushing for a one-year extension, though “the length of each of these may depend on what we can agree on as pay-fors,” Durbin said upon returning to the Capitol from the White House.

Durbin also indicated that the majority of the conversation at the leadership level has revolved around how to allocate federal funds for the year-end spending bill. Though leaders are working within the agreed-upon spending levels set in August’s debt ceiling deal, how to disburse those funds has been a sticking point.

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