Congressional leaders told their lawmakers Tuesday night they've reached a tentative deal to extend the payroll-tax cut through the rest of this year, delivering a victory to President Obama who had made it a top priority.
Under the deal, the revenue lost to the tax cut would no longer be offset by spending cuts — a major concession by Republicans, who had fought for months to reduce spending elsewhere.
The deal also would extend benefits for the long-term unemployed and full payments to doctors who treat Medicare patients, which Democrats had sought. In a nod to the GOP, both of those items would be funded through reductions in other spending.
And the package doesn't include an extension of a number of other tax breaks sought by Democrats.
The agreement, which is not yet finalized, would have to pass both the Republican-controlled House and Democrat-controlled Senate.
Walking out of a briefing Tuesday night, many House Republicans seemed to be taking a wait-and-see approach.
"In the end, when are we going to dial payroll back to where it belongs? When are we going to dial unemployment back?" said Rep. Steve King, Iowa Republican.
Mr. King said he is leaning against voting for the deal, but said he will take more time to digest the details. He said he's not sure, given Democrats' control of the Senate and the White House, that there was a better deal to be had.
The pending deal came a day after House Republicans dropped their insistence that the tax cut be offset by spending cuts — and hours after Mr. Obama on Tuesday called on Congress to extend a payroll-tax cut for 160 million workers, saying middle-class families can't afford a tax increase at the moment.
"Washington shouldn't hike taxes on working Americans right now," Mr. Obama said at the White House. "That's the wrong thing to do, but that's exactly what's going to happen in a couple weeks if Congress doesn't do something about it."
Negotiators have been meeting for a month, with an end-of-February deadline looming.
House Republicans until Monday insisted any extension of a payroll-tax-cut holiday be accomplished with spending cuts elsewhere. Democrats have opposed offsetting the tax break, arguing that Republicans didn't demand the same treatment for tax cuts for the wealthy.
The 2-percentage-point tax cut allows a worker earning $50,000 to keep about an extra $20 a week.
The payroll tax funds Social Security. Lawmakers said they will take money from regular funds to replenish the Social Security trust fund, but with the government running a deficit that means adding to the debt rather than shifting money around.
Congress first enacted the payroll-tax cut in a lame-duck session of Congress in 2010, with the understanding it would last for one year. But by the end of 2011 Mr. Obama pushed for the cut to be extended another year.
With Christmas looming, both sides were dug in.
But Republicans caved, agreeing to a two-month extension of the tax cut, unemployment benefits and doctor payments — all of them offset by spending cuts — with the added proviso that the president make a decision on the Keystone XL pipeline.
Mr. Obama signed the deal into law, rejected the pipeline, and now is poised to win the tax cut, unemployment benefits and doctor payments.
• Stephen Dinan contributed to this report.
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