WASHINGTON — Negotiators on Capitol Hill agreed Wednesday to try to extend a payroll tax cut worth about $1,000 this year for a typical worker through the end of the year.
But they remain far apart on how to pay for the extension, and for jobless benefits for millions, without swelling the national debt.
Working in a rare open meeting, a House-Senate panel Wednesday began its negotiations on the payroll tax and jobless benefits measure — core components of President Barack Obama’s jobs agenda — by signaling progress on second-tier issues regarding overhauling unemployment insurance. But the talks soon ran aground over House GOP proposals to permit states to require unemployed people to pass drug tests to receive benefits or get high school diplomas.
A Feb. 29 deadline looms but the negotiating panel chair, Rep. Dave Camp, R-Mich., is proceeding methodically and has yet to focus the talks, at least publicly, on the central issue: how to find more than $150 billion in deficit savings through some combinations of spending cuts, new fees and closures of tax loopholes.
“You’ve got to crawl before you can walk,” Camp said.
Senate Finance Committee Chairman Max Baucus, D-Mont., the lead negotiator for Democrats, hinted of potential problems ahead in assembling a bipartisan package of deficit cutting proposals to pay for the full payroll tax extension. Baucus said negotiators might be forced to accept a shorter renewal of the tax cut.
The 2-percentage-point cut in the payroll tax adds about $20 a week to the paycheck of a worker making a $50,000 annual salary, while jobless benefits average about $300 a week. Democrats argue that the two measures are pumping billions into an economy that’s still suffering from a lack of consumer demand. Obama seems to have the upper hand politically, and Republicans are going along, though without much enthusiasm.
At the same time, the panel is grappling with how to address almost a 30-percent scheduled cut in the fees that Medicare pays to doctors. The cut is the product a flawed funding-formula that dates back to 1997, but the rapidly growing cost of fixing the mess is now in the range of $300 billion over 10 years. Lawmakers in both parties are grabbing at war savings to claim the fix won’t add to deficits still exceeding $1 trillion a year.
The negotiators have adopted a cooperative tone that contrasts sharply with the vitriol of last year, but the panel is going to have to pick up the pace to meet a deadline just four weeks away.