Congressional Democrats made their first proposal on one of the more contentious elements of the payroll tax cut package with an offer to trim maximum U.S. unemployment benefits by six weeks.

The plan offered to Republicans yesterday would end unemployment benefits after 93 weeks instead of the 99 weeks now available in states with the nation's highest jobless rates, according to a document explaining the proposal. Republicans have proposed reducing the expanded jobless benefits to 59 weeks.

If Congress doesn't act by Feb. 29, unemployment benefits would be cut to 26 weeks.

Lawmakers are negotiating the benefits as part of a plan that would continue a payroll-tax cut for workers and prevent a drop in Medicare reimbursements to doctors. The proposal was the most substantial one offered by Democrats since a House-Senate negotiating panel began meeting Jan. 24. Republicans said the offer was inadequate.

“That's what you do at the very beginning of a bargaining session so your people can see you're representing their interests,” Senator Jon Kyl of Arizona, one of the Republican negotiators, told reporters yesterday. “But with a week to go, it's not really a good-faith offering.”

Congress in December passed a two-month extension for the measures, through this month, because they couldn't agree on how to pay for them through 2012. Lawmakers aren't scheduled to be in Washington the week of Feb. 20, limiting the amount of time available for negotiations.

Senate Finance Committee Chairman Max Baucus, a Montana Democrat who crafted the unemployment compensation proposal, said he would continue working with Republicans.

“We made an offer and we'll continue to negotiate,” he told reporters yesterday. “That's the standard procedure.”

In a conference call with reporters, Representative Sander Levin, a Michigan Democrat who is a House negotiator, urged activists seeking extensions of jobless benefits to pressure Republicans.

“Pour it on,” he said on the call yesterday.

As lawmakers' skepticism about the potential for an agreement rises, some have begun discussing the possibility of extending the measures for several months at a time.

“We are going to extend these programs to the end of the year,” said Representative Kevin Brady, a Texas Republican on the negotiating panel. “Whether we do it the right way now, or” an “uncertain way, two months to two months, it's going to get done.”

$100 Billion Cost

The Democratic offer didn't suggest how to pay the $100 billion cost of the package for the rest of the year. Republicans have proposed paying for it by, among other things, continuing a pay freeze for government workers, which Democrats oppose. Democrats had proposed a surtax for high-income earners.

Republicans oppose the surtax and are urging Democrats to come up with an alternative.

“We are still in the dark as to where the Senate Democrats are on how we pay for all the spending,” Brady said.

Representative Chris Van Hollen of Maryland, a House Democratic negotiator, said his party is “prepared to pay for it but you shouldn't be paying for it off the backs of middle- income taxpayers.”

In addition to the surtax, Van Hollen said Democrats would pay for the plan by ending tax benefits for oil-and-gas companies or changing the preferential tax treatment for carried-interest compensation to private equity and venture capital managers.

“We've got a lot of proposals on the table,” Van Hollen said. “But once again, they are defending special-interest tax breaks. That's what it always comes down to.”

The disagreement may put the measures at risk of expiring on Feb. 29. Still, House Majority Leader Eric Cantor of Virginia said Republicans are determined to extend the payroll tax cut.

“We are not in any way, shape or form advocating for taxes to go up on hardworking people,” Cantor said on the House floor.

House Republicans were blamed for brinkmanship in December. The House initially rejected a two-month extension of the payroll-tax cut, then accepted the short-term deal in the face of political pressure.

The negotiators “need to get moving” to reach an agreement, House Speaker John Boehner of Ohio told reporters at his weekly news conference. “The sooner the better.”

Bloomberg News

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