Payroll tax cut extended, but battle resumes after break

The House and Senate convened today in a short session with a big purpose – to extend a payroll tax cut, extend unemployment insurance, and avoid a pay cut for doctors treating Medicare patients.

With members back at home or on the road, Congress passed a compromise plan by unanimous consent – that is, without a vote.

The agreement extends expiring provisions through February. Both the House and Senate also committed to beginning negotiations for a full year extension when Congress reconvenes in January.

On Friday, Senate majority leader Harry Reid announced the appointment of conferees to these negotiations – a move he had refused to make, until the House agreed to adopt the Senate’s two-month compromise.

“I hope this Congress has had a very good learning experience, especially those who are newer to this body,” said Senator Reid, in a reference to tea party-backed House GOP freshmen, who opposed the Senate bill. “Everything we do around here does not have to wind up in a fight.”

“Legislation is the art of compromise, consensus building, not trying to push your way through on issues that you don’t have the support of the American people,” he added.

After taking a battering by everyone from the White House to the Wall Street Journal’s editorial board, House Speaker John Boehner gave up his bid to force the Senate to the bargaining table to negotiate a deal before the Jan. 1 deadline for expiring provisions.

In the end, even Senate Republicans abandoned an effort seen as destructive to the GOP’s brand as a party determined to stop tax hikes. Hours after Senate Republican leader Mitch McConnell proposed a compromise – in which the House adopts the Senate’s two-month extension and the Senate appoints conferees to negotiate a one-year deal – Mr. Boehner threw in the towel.

“Because of this agreement, every working American will keep his or her tax cut,” said President Obama in a statement Thursday. “That’s about $1,000 for the average family. That’s about $40 in every paycheck. Vital unemployment insurance will continue for millions of Americans who are looking for work.”

“And when Congress returns, I urge them to keep working to reach an agreement that will extend this tax cut and unemployment insurance for all of 2012 without drama or delay,” he added.

In addition to extending expiring provisions, the Senate bill also picks up a key demand of House Republicans to force President Obama to make an early decision on the Keystone XL pipeline, which would stretch from Canada’s oil fields to Texas refineries. The president had opted to put off a decision on the pipeline until after 2012 elections.

In a bid to draw GOP support, the measure also requires the White House to announce a decision on whether to issue a permit for the pipeline no later than 60 days after the bill is signed, unless the president determines that the pipeline does not “serve the national interest” and defend that decision to the Congress in writing.

The pipeline gave Republicans at least one talking point in the wake of a struggle that forced House Republicans to concede on nearly all issues, with the exception of a provision to ease reporting requirements on small businesses.

"With today’s agreement between the speaker and leader Reid, working Americans can breathe a sigh of relief knowing that their taxes will not go up at the end of the year and that the president will have to finally decide on whether to move forward on a pipeline project,” said Senator McConnell, in a statement.

But in a signal of partisan fights to come, he added: “The president’s statements castigating House Republicans have thus amounted to the kind of unhelpful political opportunism Americans are tired of. The president seems to forget that the only reason we are even discussing an extension of temporary measures like the payroll tax cut and unemployment insurance is his own failure to turn our nation’s economy around nearly three years into his administration.”

The next issue will be how to pay for a one-year extension. Democrats have pushed for a surtax on incomes over $1 million, while Republicans oppose increases in tax rates. With a 60 vote threshold in the Senate for any major legislation, Republicans can block a one-year extension of expiring provisions, unless Democrats back down.