Understanding the payroll tax showdown

What are they fighting about?

Without action by January 1, a number of policies will expire – an unemployment benefits extension, a payroll tax cut and a provision to avert scheduled cuts to doctor’s payments under Medicare. Philosophically, there’s little ideological disagreement between Republicans and Democrats on extending all of these provisions, but they do disagree on how to offset the deficit effects of doing so. Republicans have also wanted to force President Obama to make a decision to approve the Keystone XL oil pipeline.

The House of Representatives did vote to extend these policies for a year, but Democrats opposed other provisions in the legislation. Senate Majority Leader Harry Reid, R-Nev., and the Senate Minority Leader Mitch McConnell, R-Ky., struck a deal to extend these policies for two months, and on Saturday, the Senate voted by an overwhelming 89 to 10 margin to approve the deal, and the chamber adjourned for Christmas break. But House Republicans slammed the deal, arguing that a two-month extension was a terrible policy that would merely put off dealing with the inevitable until the end of February, and they plan to reject it and call for going into conference with the Senate to hash out a deal. Reid has said he would not go into negotiations with the House if they don’t approve the two-month extension.

Who’s right?

On policy grounds, House Republicans are undoubtedly correct that trying to set tax law in two month increments is a lousy idea. Nobody would argue otherwise with a straight face. Even House Democratic leaders, who spent yesterday bashing Republicans for not accepting this deal, acknowledged that it was sub-optimal and that a one-year extension was their preferred solution. This is also Obama’s preference. With almost two weeks until the expiration of the provisions, there is more time to negotiate further. As hard as it may be to find a full year of offsetting spending cuts all sides can agree to, they’ll have to face the same situation in two months anyway. This has all the look of Senators simply wanting to get things over with – for now – so they can return home for the holidays.

At the same time, the fact that 89 Senators already approved the two-month extension, which had the support of Senate leadership, puts House Republicans in a tough spot and allows Democrats to claim legitimate bipartisan support for this deal. It’s still unclear why McConnell would have gone ahead with a deal in the Senate that was so strongly opposed by House Republicans. Did he approve the deal without any input from House Speaker John Boehner on where House Republicans were? Or did Boehner reassure McConnell about the deal, but misjudge how his own members would react? Those were the questions swirling around the Capitol yesterday, but regardless of what happened – we are where we are.

What’s going on today?

The House is expected to approve a motion that would effectively block the Senate bill and request a conference between both chambers. But Republican leaders structured the vote in a way so it avoids its members having to vote directly on the Senate bill. This could be because they don’t have the votes to reject the bill outright. If every Democrat approves the Senate bill, it would only take a few dozen Republican defections to pass the bill and send it to Obama. Assuming the motion to block the Senate bill goes forward, much of today will be spent with Democrats blasting Republicans for not allowing a direct vote on the Senate bill, saying they’re scared about losing and trying to raise taxes on the middle class, while Republicans will argue that they voted to go to the negotiating table and keep working until they reach a compromise on a one-year extension.

What happens next?

Either House Republicans change their mind about the two-month extension, or Reid somehow backs down and goes into negotiations with the GOP. As far as how that ends, your guess is probably about as good as that of anybody in the Capitol building.