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Differences Remain on Paying for Payroll Tax Cut

The payroll tax cut conference committee is prepared this week to debate its most daunting difference: how to pay for the full-year bill.

According to aides staffing the panel and Democratic lawmakers emerging from a meeting this evening, the conference committee will debate Tuesday how to offset a full-year extension of the payroll tax holiday, unemployment benefits and lapsing Medicare doctor payments.

But with only three weeks left to bridge the gap between the parties and no clear path toward agreement, the arguing might be as political as it is constructive. Senate Democratic leaders have already announced they are working on a backup plan in case the bipartisan, bicameral committee fails to reach a deal.

And that seems just fine to Democratic conferees.

“I think the Majority Leader is doing exactly what he has to do,” said Sen. Benjamin Cardin, a conferee. “If we can’t get it done by the end of the month, we shouldn’t let these provisions expire.”

The Maryland Democrat added that he is “cautiously optimistic” the committee can reconcile the House and Senate positions, but both he and Sen. Bob Casey (D-Pa.) would not confirm indications from aides close to the committee that Democrats would make more formal offers to Republicans this week.

Time is running short, and leadership aides in both parties and chambers appear skeptical that the panel will reach a solution on its own, indicating that a deal among leaders — like so many other agreements this Congress — will be required.

At his daily briefing today, White House Press Secretary Jay Carney was asked about what the administration is doing to avoid an “eleventh-hour crisis or negotiation.” Carney said the White House is “in conversations with folks on the Hill” but that the process is “being led by the Hill.”

“It should be fairly simple. We’ll see if that is in fact the case,” Carney told reporters. “But we believe that everyone in Congress, Republicans and Democrats alike, should see it as the right thing to do to make sure that 160 million Americans don’t have their taxes go up on March 1.”

There is some political calculation on the White House’s part in deferring to the Hill on this process. President Barack Obama is gaining momentum on the campaign trail by running against Congress and made that a cornerstone of his State of the Union speech last month. If the conference committee deadlocks, like the Joint Committee on Deficit Reduction before it, Obama has another example in his dossier of failed Congressional initiatives.

It’s on this point that it appears Republican leaders are trying to turn the momentum in their favor and against Democrats.

Speaker John Boehner (Ohio) and House Majority Leader Eric Cantor (Va.) released a joint statement today urging swifter action from the conference committee and playing up the perceived division among Democrats that has surfaced since Senate Majority Leader Harry Reid (D-Nev.) announced last week he would be working on separate backup legislation.

“If Senate Democratic leaders will not allow their conferees to support the bipartisan spending cuts passed by the House, they have a responsibility to tell the American people what spending cuts they are willing to support,” Boehner and Cantor said. “If they aren’t willing to do either, then the American people will be right to question Senate Democratic leaders’ seriousness about actually getting a full-year payroll tax cut enacted.”

For their part, Democratic conferees have been reluctant to criticize leadership’s moves or openly question the hands-off approach of the administration.

“We’re still working. I don’t want to speculate,” Casey said. “I think there’s going to be a lot of inside baseball.”

The full committee is slated to reconvene Tuesday morning. A GOP aide indicated that Republican conferees will push for some of the offsets contained in the House-passed bill to extend the payroll tax holiday for a full year. Some of those proposals could include cuts to federal employees’ retirement contributions and a pay freeze for federal workers, spectrum auctions, and cuts to Obama’s health care reform law.

Another major issue is unemployment insurance reforms. The House Republicans suggested sweeping changes to the current system, and Democrats have only made a modest proposal on the less controversial issues.

At a hearing last week, House Ways and Means Chairman Dave Camp (Mich.), the top Republican on the conference committee, asked Democrats for an offer on the larger jobless benefits issues. Sen. Max Baucus (D-Mont.) said his side was prepared to make that offer but did not designate when it would be made. GOP aides said late today they still have not received the offer.

It’s possible the committee could compromise on unemployment insurance.

“We are prepared to go much further on some of these issues, but we have got to see some movement on the other side,” Cardin said. “We’re in favor of reforming [unemployment benefits], but let’s reform it in ways that help states that need it the most.”

Daniel Newhauser contributed to this report.

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