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Payroll Deal Deadline Looms

Top Conferees Meeting in Private While Terms of Tax Cut Deal Shift

Despite a week of public grousing and finger-pointing, payroll tax cut conferees and staff still hope their ultimate deal will avoid both a tax increase and a reaffirmation of a do-nothing Congress.

Senate Finance Chairman Max Baucus (D-Mont.) and House Ways and Means Chairman Dave Camp (R-Mich.), the conference’s co-chairmen and top negotiators, were speaking one-on-one and in private last week, an indication the once-public talks have moved behind closed doors.

“It’s a good sign that our two leaders on the conference are talking, and I think the general atmosphere is positive right now,” conferee Sen. Benjamin Cardin (D-Md.) said Friday. “Hopefully, they have a framework for a final conference agreement” this week.

Speaker John Boehner indicated Thursday he is not interested in imposing deadlines on his conferees, and although he and Camp have been in communication, it seems unlikely the Ohio Republican will intervene this week.

It’s also unlikely at this point that House leaders will cancel recess, although conferees will almost certainly work through the scheduled Presidents Day district work period if a deal is not closed by Friday.

Senate Democratic aides have speculated the Senate might not recess as scheduled to allow conferees to wrap up their work.

Early last week, Majority Leader Harry Reid (D-Nev.) said publicly if conferees did not appear close to a deal by today or Tuesday, then Senate leaders would bring their own plan to the floor.

But Democratic sources tracking the issue suggest Reid might not move that quickly, noting that leaders do not want to pull the rug from underneath the panel.

“He still is reserving the right to bring something to the floor,” a senior Democratic aide said of the Majority Leader. “But we’re in the course of seeing offers being made in the context of the conference committee.”

Regarding the terms, Democrats were tight-lipped. But sources inside and outside the conference committee suggested the party would be dropping its push for a millionaires’ surtax. Instead, any offer made on how to pay for the package  will likely include closing tax loopholes — such as a corporate jet provision Reid and Minority Leader Mitch McConnell (R-Ky.) tried to include in their original payroll agreement — and provisions affecting oil and gas companies.

Previous bipartisan efforts also have considered non-tax revenues, increased government fees, as well as using war savings to offset spending, and even telecommunications spectrum auctions. House Energy and Commerce Chairman Fred Upton (R-Mich.) said conferees were close to a deal on the spectrum auction to offset $16.5 billion of a total deal. But Thursday, Boehner said war savings offsets don’t “pass the straight-face test.”

Throughout the process, the same issues that have defined the 112th Congress, from the negotiations led by Vice President Joseph Biden on a debt ceiling deal to the Joint Committee on Deficit Reduction, still face these lawmakers — particularly when it comes to taxes.

In a public meeting last week, Republican conferees proposed an extension of a federal worker pay freeze, health care premium adjustments and further Medicare prescription adjustments for higher-income beneficiaries. Democrats rejected those offsets on the spot.

“We put up what we thought were three of the most easy ones to get and everyone rejected them,” said Sen. Mike Crapo (R-Idaho), a conferee. “So at this point, we’re waiting to see what the Democrats come back with.”

Democrats, confident that they are in a good negotiating position after December’s House Republican flameout over the payroll tax cut extension, put the heat on their counterparts Wednesday evening with an offer on unemployment insurance benefits that included no offsets.

“We made a proposal. The ball is in their court to make a counterproposal,” conferee Rep. Chris Van Hollen (D-Md.) said Thursday.

The federal pay freeze had been one of the final offsets considered by Reid and McConnell before their full-year extension talks collapsed at the end of last year, but a source indicated that in these talks, “Democrats have taken a hard line on the pay freeze.”

Lawmakers need to come to an agreement by Feb. 29; otherwise, the payroll tax cut, unemployment benefits and a staving off of cuts to Medicare doctor reimbursements will lapse.

This week could be a crucial one for the committee, as it could reveal some of the final positions taken by the parties. Senate aides suggested that Reid might bring to the floor some iteration of what Baucus floats this week.

Despite the apparent lack of progress with only two and a half weeks left before the deadline, lawmakers of both parties seem loath to pass another short-term extension.

“I want these negotiations to succeed. We’ve got to reach a conclusion to it and nobody I know of is talking about a short-term extension,” conferee Sen. Jon Kyl (R-Ariz.) said.

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