House-Senate deal reached on the payroll tax measure

WASHINGTON (AP) - Calling quits to a bruising election-year fight, negotiators on Capitol Hill sealed an agreement late Wednesday on legislation to renew a payroll tax cut for 160 million workers and jobless benefits for millions more.

Sen. Max Baucus, D-Mont., announced the agreement, capping a long day of wrangling over final details of the measure, which is a top priority of President Barack Obama. The announcement paved the way for votes in both House and Senate this week.

The $150 billion measure represents a tactical retreat for Republicans, who were generally unenthusiastic about the legislation but eager to move beyond the issue. With the campaign season starting, they don't want Obama and Democrats in Congress to be able to claim that the GOP was standing in the way of a middle-class tax cut.

It represented a rare burst of bipartisanship in a bitterly divided Congress.

The legislation would continue a 2 percentage-point cut in the Social Security payroll tax, renew jobless benefits averaging about $300 a week for people languishing for long periods on unemployment rolls and protect doctors from a huge cut in their Medicare reimbursements.

The measure carries a price tag of roughly $150 billion over the coming year, partly financed by new auctions of telecommunications spectrum to wireless companies and by requiring newly-hired federal workers to contribute 2.3 percent of their salary toward their traditional defined benefit pensions. The pension provision would raise $15 billion but was more palatable to supporters of federal workers in the Maryland and Virginia delegations than a version sought by House Republicans - and initially tentatively agreed to by key Democrats - that would have required current federal workers to contribute 1.5 percent more to their pensions.

Wednesday evening featured brinkmanship from Sen. Ben Cardin, D-Md., a member of the House-Senate negotiating panel, who withheld his support for the entire measure until the pension modifications were made.

Cardin's state is home to many federal workers. His signoff was especially crucial since Senate Republican negotiators, who were largely out of the talks, were withholding their support too.

Auctions of portions of the nation's airwaves to wireless companies would net another $15 billion or so - even after $7 billion is set aside to construct and run a new public safety network for emergency first responders.

Extending the payroll tax cut and renewing long-term jobless benefits were key planks in Obama's jobs program, which was announced last September but has been largely ignored since. The measures are intended to help the economy by giving people more money to spend, fattening a typical bimonthly paycheck by $40 or so and giving the unemployed critical cash that most of them turn around and spend immediately.

The measure also includes a key adjustment to the badly broken Medicare payment formula for doctors, which would otherwise impose a 27 percent cut on March 1 under a 1997 budget law. The $20 billion cost would be covered in part by cuts to a fund created under Obama's health care law that awards grants for preventive care and by curbs on Medicaid payments to hospitals that care for a disproportionate share of uninsured patients.

House Speaker John Boehner, R-Ohio, said the legislation would probably be voted on by the end of the week. GOP leaders had jump-started the talks over the weekend by dropping a demand that the tax cut be paid for with spending cuts. On Monday, Republicans upped the ante by threatening to advance the payroll tax cut on its own - and leave jobless benefits and the Medicare fix behind, which set off alarms with Democratic lawmakers and at the White House.

"We were not going to allow the Democrats to continue to play political games and raise taxes on working Americans," Boehner told reporters. "We made the decision to bring them to the table so that the games would stop and we would get this work done."

Some rank-and-file Republicans continued to grumble that the measure was flawed and that the payroll tax cut, first enacted in December of 2010, has done little to prop up the economy. But the prevailing instinct among Republicans was political survival and not wanting to look like they were getting in the way of an election-year tax cut.

"Not going to do this again, but if it gets us through the year, gets this issue off the table, it's worth doing this way," said Sen. Lindsey Graham, R-S.C.

One snag on Wednesday, aides said, had involved a spat over new auctions of wireless spectrum, a key provision required to help defray the $30 billion cost of extending jobless benefits. House Republicans moved in the Democrats' direction on the amount of money dedicated to creating the public safety communications network for first responders.