According to Donna Smith and Thomas Ferraro of Reuters, “Republican leaders in the House of Representatives on Monday dropped their demand for spending reductions to pay for extending a tax cut for 160 million American workers, setting up a likely breakthrough for agreement with Democrats.”
This clears the way for the majority of the House (Republicans) to vote this week to renew for 10 months the tax cut that is set to expire on February 29.
However, the Senate, which is mostly Democratic, would likely support the payroll tax extension as laid out by the Republicans. They would support it even with the fact that they would prefer including in the deal some provisions on jobless benefits and payments for doctors treating Medicare patients. The only burden is that Republicans now want to negotiate this separately.
House Speaker John Boehner, along with his deputy Eric Cantor, who has often taken a more hardline approach in budget negotiations with Democrats over the past year, issued the offer.
According to Reuters, “Republicans made deficit reduction a rallying cry during last year’s budget battles with Democrats that brought the U.S. government to the edge of a shutdown three times and cost the country its coveted AAA credit rating from the Standard & Poor’s rating agency.”
Dropping the demand for spending cuts in order finance the payroll tax cut could draw fire from conservatives within the party who currently oppose adding to a trillion-plus deficit.
Many economists feel that extending the tax cut through the 2012 election year is needed to shore up sluggish U.S. growth even as some Republicans questioned its economic value. The tax cut could inject about $100 billion into the U.S. economy this year. Keep in mind that doesn’t mean it will.
If the halt had persisted, President Barack Obama could have easily added it to his list of complaints about what he calls a “do nothing Congress,” which seems to be the central theme in his re-election campaign.
According to recent polls, Congress public approval is at record low and polling data show voters clearly blame Republicans, who have majority control over the House of Representatives.
Although, Democrats have gained an upper hand in the battle over the payroll tax cut, using Republican opposition to a Democratic plan to pay for it with a tax on millionaires to portray them as favoring the wealthy over the struggling middle class.
The article by Reuters also states, “Boehner and Cantor blamed Democrats for blocking agreement on spending cuts to cover the roughly $170 billion price tag of extending the payroll tax cut and unemployment insurance for a full year, along with keeping doctor payments under the Medicare health insurance program for the elderly at current rates.”
This is being done in order to protect small business’ and entrepreneurs an opportunity while ensuring taxes don’t go up on middle class workers.
The compromise off was first made by Republicans over the weekend.
A Republican aide said the party had been discussing the move for a week and decided to go ahead with the plan when weekend talks failed to produce a comprehensive agreement.
We’ll have to just wait and see what the next few weeks, months, year brings us.
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