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Harry Reid Floats Two-Month Extension on Payroll Tax Cut

Senate negotiators continued working toward a year-end extenders package today, with Majority Leader Harry Reid (D-Nev.) floating the idea of a two-month extension as a “Plan B” in case a larger deal was out of reach.

With a $1 trillion-plus omnibus appropriations package agreed to in principle, all that Members have left standing between them and Christmas vacation is the catchall bill to extend the payroll tax cut holiday for employees, unemployment benefits and payments to Medicare doctors.

The talks over the package have been highly politicized and unfocused at times, but with the appropriations bill ready to go, lawmakers are looking for a swift resolution to tie up all their legislative loose ends. Apparently a two-month deal is on the table as a way to do just that.

“I always have a Plan B,” Reid said of the short-term deal this evening. “I hope we don’t get there, but if we do, what the two-month would accomplish is make sure that people would continue to get the payroll tax holiday and also the unemployment benefits, and also doctors would able to continue their work on Medicare patients.”

Multiple Democratic sources confirmed that the Plan B would be fully paid for.

It was unclear this evening how the public acknowledgement of a short-term alternative will affect the larger negotiations for a full-year package. And it’s even less clear why lawmakers would want to engage in this fight again two months from now, as both parties have had their ups and downs in the course of messaging the negotiations.

Democrats had been winning on a message of protecting the middle class, accusing Republicans of advocating for America’s wealthiest at their expense.

Republicans effectively shifted the argument in their favor by using a veto threat from the president on the Keystone oil pipeline, and then Senate Democrats’ delay of passing the almost-entirely-agreed-upon omnibus, as signs that the Democrats were willing to jeopardize their own priorities and shut down the government unless they got everything they wanted.

But Democratic aides insisted today that they wanted to send a signal that regardless of whether a larger deal were reached, the benefits being received by Americans would not be dropped.

A Democratic source close to the talks indicated that negotiators had found $105 billion to $110 billion in the larger discussion for offsets, which is about halfway to the total needed for a full one-year extension. Republicans would not confirm this figure, and divisions over how to pay for such a bill are wide.

Democrats had dropped their demand for a millionaires surtax, but Republicans are still pushing for a pay freeze for federal workers.

The two-month extension would postpone the battle over how to pay for it as well as more controversial reforms such as unemployment insurance and riders such as the Keystone pipeline, leaving the door open to the fights replaying themselves in March.

House Minority Leader Nancy Pelosi, when asked about the potential of a two-month deal on MSNBC, was noncommittal.

“What’s important about this is it keeps the fight going on,” the California Democrat said. “You have to give Republicans the credit; they really stick with the guy who brought them to the dance. They protect the wealthy.”

Regardless, the House is more or less waiting for the Senate to act.

Earlier in the day, both Reid and Senate Minority Leader Mitch McConnell (R-Ky.) expressed optimism that a deal on the extenders package could get done. It was a sharp turn in the discourse following a meeting Wednesday night of the two leaders with Speaker John Boehner (R-Ohio.). Aides tracking the negotiations tonight characterized talks as ongoing.

Jessica Brady contributed to this report.

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