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GOP Cautious in Payroll Tax Fight

The fight over an extension of the payroll tax cut was the last major legislative battle of 2011 — and now it’s a fight Republicans in particular are loath to repeat in the opening weeks of 2012.

The conference committee formed at the behest of House Republicans to deal with a long-term extension of the payroll tax holiday, unemployment benefits and Medicare doctor payments has already begun its work, albeit slowly. Members of each faction have been in talks during the holiday break, reviewing measures discussed in previous budget-negotiating groups and plodding forward to reach a deal before March. But Democrats clearly believe they have the upper hand, emboldened by a serious messaging win on the short-term payroll extension that divided Republicans in December.

And the political opportunity afforded to Democrats is not one they’ve been shy in trying to exploit.

“I don’t know what the Republicans are afraid of. Where are they? They’re telling us that they were in late in December so they can’t be here in January? What is this, one month on, one month off?” Minority Leader Nancy Pelosi said Friday after House Democrats were blocked from opening the floor to discussion of the payroll tax cut.

“We were told with great vehemence [Thursday] that the Congress was in session,” the California Democrat continued, alluding to attacks launched against President Barack Obama’s controversial recess appointments. “That’s why we went to the floor … to call upon the conferees to get to work.”

House Republican conferees held a conference call Friday to discuss the ongoing work by the Congressional Research Service and the Joint Committee on Taxation in identifying areas of overlap between the full-year House-approved bill and the initial two-month extension language approved by the Senate, neither of which became law.

A spokesperson for House Ways and Means Chairman Dave Camp (Mich.), who is leading the GOP contingent, said that “all Members are anxious to begin” the committee’s formal work, but it’s unclear how soon that will happen. The House is not expected back until Jan. 17, with the Senate returning on Jan. 23. Senate sources indicated it’s possible their conferees would return early, but it was not immediately clear that they would do so.

Either way, Members are working  against a Feb. 29 deadline, when the current compromise two-month payroll tax cut extension will expire.

The timeline for the committee’s work, both when it will start and how quickly it can finish, will be dictated more than anything by politics and messaging.

Sources close to leadership, the failed Joint Committee on Deficit Reduction and the conferees all seem to agree that the task at hand should not be too difficult: Previous negotiators have provided the new group of lawmakers an expansive menu of offsets to cobble together for the full-year package.

Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) were very close to a full-year agreement at the end of 2011. House Republican leaders had been preparing to present a full-year extension to their Conference when the larger negotiations broke down, and the two Senate leaders struck the two-month agreement.

The major sticking point became how to pay for the legislation, even though negotiators were more than halfway to the projected $190 billion price tag of the full package.

“I hope this Congress has had a very good learning experience, especially those who are newer to this body. Everything we do around here does not have to wind up in a fight. That isn’t the way things need to be,” Reid said at a year-end press conference on Dec. 23. “I have instructed … my four Senators, there is nothing off the table. Everything’s on the table.”

A complicating factor for all parties will be the White House. President Barack Obama has been newly emboldened by House Republicans’ December flub on the short-term deal. And he has had great success running against Congress, even if at times he fails to distinguish “Congressional Republicans” from “Congress” — much to the dismay of Democrats.

On Friday, the administration announced its intent to include a federal pay increase in its fiscal 2013 budget. But in December, Reid and McConnell were considering including a pay freeze extension as an offset to the payroll tax cut package. House Republicans included the freeze in their approved legislation that will be the basis of the conference report.

It’s unclear how directly the White House will be involved in forcing Congress’ hand, and the administration may have the least to lose if the conference committee fails. The inability of Congress to come to an agreement would only further the White House’s narrative that Capitol Hill is where the American people should direct their ire in
Washington, D.C.

Skeptics have expressed concern that the conference committee, a rarely used legislative formality, will be a “super committee 2.0,” a snarky allusion to the most recent in a long line of budget negotiating groups that failed to come to any sort of deal. Six of the conferees were on the super committee.

At the end of last year, Reid bristled at the idea that the payroll group was destined to fail.

“Well, of course, this is a different, totally different program than the super-committee,” Reid said in December. “The reason I went to [some] lengths to describe who all my conferees are is I want to make sure that everyone understands from our perspective this is a new day.”

Normal conference committee processes can be completed within a matter of days, particularly on a smaller bill such as the one being considered. But it’s possible both sides could drag out what could be an easy process for political gain, especially with a national election intensifying as a backdrop.

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