The $145 billion payroll tax cut deal is heading toward passagein the U.S. Congress as soon as today with bipartisan support,including from many lawmakers who will be voting for ideas theyoppose.

“This is real money that will make a real difference in people'slives,” President Barack Obama said in a statement last night. “Iwill sign it into law” as soon as Congress passes it.

The agreement would extend the expiring tax cut, unemploymentbenefits and doctors' Medicare reimbursements through 2012. Itcontains health-care cuts opposed by Democrats and an increase inthe budget deficit disliked by Republicans, and those policiesalready have prompted many lawmakers to announce theiropposition.

“If there's an agreement with the other side, then there's goingto be enough votes,” said Representative Tom Cole, an OklahomaRepublican. Despite objections to some parts of the bill, he said,“I don't think it's going to change the outcome.”

Negotiators led by Democratic Senator Max Baucus and RepublicanRepresentative Dave Camp reached an agreement early yesterday afterObama intervened to reassure Democrats wary of the effects ofpension changes on federal employees. The deal ended a months-longstalemate over the payroll tax cut and the other expiringprovisions.

In announcing the agreement, Democrats claimed victory foravoiding cuts to Medicare beneficiaries and for getting Republicansto drop demands that the bill be fully financed with spending cutselsewhere in the budget. The House planned to complete action onthe bill by midday.

Republicans said they won by reducing emergency unemploymentbenefits to a maximum of 73 weeks from a maximum of 99 weeks andpreventing Democrats from raising taxes.

“You don't have all the leverage, so you have to work with whatyou have,” said Representative Greg Walden, an Oregon Republicanwho helped negotiate the agreement.

The bill would extend a two-percentage-point cut in the payrolltax funding Social Security through 2012. Employees would pay 4.2percent of their wages, down from the typical 6.2 percent, for allwages up to $110,100.

The tax break would cost $93.2 billion, which would be borrowedand then transferred from the general fund to Social Security. Thecost of the measure's other provisions would be covered by spendingcuts and other changes, and the bill would increase the deficit by$89 billion over the next decade, according to the CongressionalBudget Office.

'Fair Agreement'

House Speaker John Boehner called the deal a “fair agreement”and said he would support it.

“But let's be honest: This is an economic relief package, not abill that's going to grow the economy and create jobs,” saidBoehner, an Ohio Republican, at a news conference.

Some lawmakers said yesterday that they will vote against theproposal, and opposition from both parties means that HouseRepublicans and Senate Democrats, who hold the majorities, willneed votes from members of the other party in their chamber.

“We're going to need some significant Republican votes,” SenatorCharles Schumer of New York, the chamber's No. 3 Democrat, toldreporters yesterday.

Senator Mark Warner, a Virginia Democrat, said in an interviewhe had “grave concerns” about adding the cost of the payroll taxcut to the budget deficit.

“Now that we've handed out this political candy, it's going tobe hard to take it back,” said Senator Jim DeMint, a South CarolinaRepublican, in an interview. He said he plans to vote no.

The $30 billion unemployment extension would gradually reducethe number of weeks that recipients can receive benefits, down fromthe current 99 weeks, according to separate summaries provided byDemocrats and Republicans on the House Ways and Means Committee. Bythe end of the year, most states would offer maximum benefits for63 weeks while people in high-unemployment states would be eligiblefor 73 weeks of benefits.

According to summaries of the legislation, the bill would makeother changes to unemployment policy, such as allowing states torequire drug tests of some benefit recipients.

Representative Sander Levin of Michigan, the top Democrat on theWays and Means Committee, said in a statement he was pleased theagreement wouldn't require recipients to seek high-schoolequivalency degrees.

“It is far from perfect, but it does maintain vital benefits forthose who have lost their jobs through no fault of their own,”Levin said.

Spending Cuts

The bill includes revenue-raising provisions and spending cutsto cover the cost of the unemployment and Medicare extensions.

These include the $15 billion auction of a portion of thewireless spectrum and a $15 billion requirement that new civilianfederal employees and members of Congress pay more for theirpensions. The pension change would require employees hired startingin 2013 to contribute an additional 2.3 percentage points of theirwages toward their pensions, according to the FinanceCommittee.

The legislation doesn't include higher fees that Fannie Mae andFreddie Mac charge to lenders for new mortgages. Lawmakers had beendiscussing that idea.

Obama intervened in the final negotiations, telephoningDemocratic Senator Ben Cardin and Representative Chris Van Hollen,both of Maryland, to urge them to support the agreement although itwould require newly hired federal workers to pay more forpensions.

Cardin said Obama assured him that federal employees' salariesand benefits wouldn't be a routine source of spending cuts forfuture legislation. Many federal workers live in his districtoutside Washington.

“He understands my concern about the federal workforce and how Iwant to make sure that we don't repeat what's going on in thisconference as we go through this Congress,” Cardin said in aninterview.

Cardin said he decided to sign the agreement after speaking withObama and securing a change to exempt current federal workers fromthe increased contribution requirement. Obama spoke with Van Hollenabout the pension requirement, according to a Democratic aide withknowledge of the conversation who spoke on condition of anonymitybecause the discussions were private.

Hospitals will bear much of the cost of the bill. They will loseabout $11 billion in government payments for bad debt, incurredwhen Medicare patients don't make co-payments or pay deductibles,and for charity care.

Clinical laboratories such as Laboratory Corporation of AmericaHoldings will take a 2 percent Medicare payment cut in 2013,according to congressional documents.

Louisiana will surrender about $2.5 billion the state was set tocollect in higher payments for its Medicaid program, a policyenacted in 2010 as part of the health-care overhaul at the behestof Senator Mary Landrieu, a Louisiana Democrat.

The agreement also would trim $5 billion over a decade from a $2billion-a-year fund created by the 2010 health-care law to supportcommunity preventive and public health-care programs.

Bloomberg News

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