Payroll Tax Cut Extension Focus Shifts to Senate

Depending on one's perspective, progress is being made regarding an extension of the payroll tax cut, or Capitol Hill lawmakers are merely engaging in more theatrics.

The Republican-led House passed a payroll tax cut extension Tuesday, 234-193, but the bill contains Republican priorities that Senate Democrats oppose, including a controversial item that would speed-up the approval of the 1,700-mile Keystone XL oil pipeline, and another provision that would reduce the maximum unemployment compensation benefit to 59 weeks from 99 weeks. The House bill would also allow states to drug test unemployment compensation applicants.

The United States Conference of Catholic Bishops (USCCB), in a letter to the U.S. House of Representatives, called the drug test provision a deep affront to the character of millions of Americans who desperately want to get back to work. The Bishops added that lawmakers have a moral obligation to ensure unemployed workers and their families have the means to survive when the economy fails to generate sufficient job growth.

The House GOP bill would also postpone scheduled cuts in Medicare reimbursement rates for doctors, but pay for the doc fix initiative by raising Medicare premiums for upper-income seniors and eliminate some funding for the federal health care law.

If Congress doesn't approve the payroll tax cut extension, employees will begin paying 6.2 percent on the first $110,000 in wages starting January 1, 2012, up from 4.2 percent this year. The payroll tax funds Social Security.

Reid: House GOP Bill Wasted Time

The outlook for the House GOP bill in the Democratic-controlled Senate? Not good, to say the least.

Senate Majority Leader Harry Reid, D-Nev., called the bill a pointless partisan exercise, adding that the bill represented a laundry list of Republican pet projects.

Perhaps the most egregious Republican add-on is the Keystone pipeline provision. The pipeline's environmental impact still must be determined -- opponents say the current pipeline route would risk contaminating a key aquifer -- and it's highly unlikely Democratic Senators will agree to any payroll tax cut extension containing the Keystone element. In addition, the U.S. State Department, which is responsible for examining the environmental impact of the cross-border project, Tuesday said it would be able to complete the environmental review in the 60 days that the Republican bill requires, The Washington Post reported Wednesday.

One way for Reid to restructure the debate on the issue is to add items that would appeal to Republicans and to conservatives, more broadly, and Reid said he plans to just that: he said he would add $35 billion in extensions of various tax breaks to the payroll tax cut, Bloomberg News reported Wednesday.

The expiring tax breaks would include incentives such as a research and development tax credit and a benefit for banks' overseas operations; both expire Dec. 31.

Political/Public Policy Analysis: Put the House GOP bill in the category of theatrics -- basically, a waste of time. Instead of delivering a practical, bipartisan bill, the House GOP approved a bill that is acceptable to its conservative, Tea Party base, and almost no one else. The House GOP bill is a non-starter in the Senate, hence, it will be up to Reid and Minority Leader Mitch McConnell, R-Ohio, to craft a bill that's acceptable to both Democrats and Republicans.