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Democrats Open Party to Flak With Payroll Tax Gambit

With only three days left before a government shutdown, Democrats took a gamble Tuesday, strategically linking a package to extend the payroll tax holiday and unemployment benefits to an all-but-agreed-upon bill that wraps up fiscal 2012 appropriations.

The White House and Senate Democrats are delaying action on the omnibus spending package because they worry that approving it would remove the incentive for House Republicans to stay in town and reach a compromise on the payroll tax cut extension. But in the process, they’ve made themselves vulnerable to the attack they’ve been using all year against Republicans: that they’re holding the government hostage until they get what they want.

The House voted 234-193 to pass its version of the extenders package Tuesday. In addition to extending the payroll tax holiday, it would also extend long-term unemployment benefits and head off a scheduled cut to reimbursements for doctors who treat Medicare patients.

The House GOP package, however, turned off Democrats and the White House because it includes provisions to expedite approval of the Keystone XL oil pipeline project and reduce Clean Air Act regulations for boilers, as well as slow funding for the health care reform law.

Democrats, who want to pay for the extension by taxing wealthy Americans, also blast the GOP’s bill for trimming the federal workforce and extending a freeze of their pay.

The White House on Tuesday threatened a veto of the House bill in the strongest language available, stating baldly that the president “would veto the bill.”

A frustrated Rep. Mike Simpson — who as chairman of the Appropriations Subcommittee on Interior and Environment has slogged his way through dozens of riders to reach a bipartisan deal — said Democrats are playing shutdown politics.durb

“They’re trying to get some leverage on the tax bill,” the Idaho Republican said. “After six months of trying to blame Republicans for trying to shut down the government, they’re the ones that won’t sign the conference report that would keep the government open.”

Even some Democrats were frustrated at the tactic.

“Our bill is done, and it should go to the president immediately,” said Rep. Jim Moran (D-Va.), ranking member on Simpson’s subcommittee. “We’re not holding it up. … I can’t speak for Harry Reid. I can’t speak for him. As far as I’m concerned, it should be done.”

White House Press Secretary Jay Carney would not say Tuesday whether President Barack Obama had instructed Senate Majority Leader Harry Reid (D-Nev.) to prevent conferees from signing off on the appropriations bill, saying only that the two men “agreed to a course of action here that would ensure” the payroll tax holiday extension. “We’re not hiding from that at all,” Carney added.

Carney said there were still holdups in the larger spending bill, and some Democrats on Capitol Hill pointed to differences in funding levels for the Commodity Futures Trading Commission, which the White House says needs more money to implement regulations created by the Dodd-Frank financial reform bill.

There also were a handful of policy riders that were sticking points, according to Senate Democratic aides.

But the fights over the smaller issues seemed to be providing cover for the larger strategic move, one that is dividing Democrats.

House Ways and Means ranking member Sander Levin said he agrees with the Senate strategy of putting heat on the Republicans.

“I think it’s wise for the Senate Democrats to insist that if we address the [appropriations package], that we find common ground on this bill,” the Michigan Democrat said. “Republicans have to give ground on their refusal to look at taxation of the very wealthy families of this country.”

It is unclear what leverage Democrats will gain from the strategy. They had been winning the messaging battle with Republicans on the payroll tax cut extension — charging that the GOP was protecting the low tax rates of the wealthy but doing little for the middle class and working class — but then ceded ground by letting the larger debate be consumed by the fight over the Keystone XL oil pipeline. Now, with a nearly complete bill in limbo and no clear way forward on a payroll tax compromise, Democrats have opened the door for Republicans to shrug off blame for impasse because the House had two pieces of legislation at the ready.

“I am not sure if that confers any great advantage,” Senate Budget Chairman Kent Conrad (D-N.D.) said of delaying the appropriations conference report. “There are so many things that have to be done now. … So trying to find a way through this thicket is not easy.”

Senate leaders obviously disagree.

“We don’t want to be stuck in a position where we’re being given a CR or an omnibus, which they say, ‘Do that. We can’t agree on the other things. We’ll talk about it in January,'” Senate Majority Whip Dick Durbin (D-Ill.) said. “The president has made it clear that’s unacceptable to him. It’s unacceptable to us. Let’s get our job done.”

Democrats and Republicans were in dispute Tuesday over whether the appropriations package even had been completed, with Senate Minority Leader Mitch McConnell (R-Ky.) saying all that is missing “is the signatures” and Democrats maintain there are still several sticking points. Regardless of the level of disagreement, the very public move to use the appropriations legislation as a negotiating tool created serious frustrations across chambers and parties.

House Appropriations Chairman Hal Rogers said Democrats reneged on the deal at the eleventh hour.

“It’s settled. The big four were ready [Monday] night to file the bill,” the Kentucky Republican said, referring to the Democratic and Republican leaders of the Appropriations panels. “Then the word came that Sen. Reid had put a hold on our bill, that the Senate conferees would not sign the report.”

The holdup also created more uncertainty as to how Congress will finish its work as the year comes to a close. Senate Democrats on Tuesday discussed bringing the House GOP’s extenders bill up for a vote in short order to show it could not pass the Senate. Doing so would enable the principals to begin negotiations on “the real endgame,” according to an aide.

Others still talked of moving on another temporary continuing resolution to avoid a shutdown in case Democrats stood their ground. House Republican leadership aides, though, indicated they were not yet working on such a backup plan.

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