As Payroll Fight Wraps Up, Dems Prepare For Next Battle

House Democrats will support a GOP bill to extend the expiring payroll tax cut through the end of the year, when Republicans bring it to a vote later this week. That basically puts to rest any remaining doubts that the provision will expire at the end of the month.

Now the fight is on between the parties over whether and how to renew two other expiring provisions — extended unemployment benefits, and Medicare physician reimbursement rates (the “doc fix”) — before March. And the balance of power in this battle is much less clear.When the payroll tax cut was at stake, Democrats unquestionably enjoyed the upper hand. But with that issue likely resolved, Democrats are trying to keep as much heat as they can on the GOP not to play games with UI or the doc fix — provisions which together cost $60 billion.

The problem for Dems is that UI and the doc fix — while extremely important to seniors, doctors and the unemployed — carry less political valence than the payroll tax cut. And so they’ll have a harder time pushing the GOP to accept higher tax revenues on wealthy people as one way of financing those two items.

For now Dems and Republicans are trying to negotiate a compromise that includes all three in a single package — with the payroll tax cut left unpaid for. If that effort fails, it will lead to a rough floor fight in the Senate over the remaining two.

“We have long proposed bringing this tax cut to the floor without pay-fors, and House Democrats will support it so that taxes are not raised on 160 million working Americans, but this should not be a substitute for the work of the Conference Committee,” said House Minority Leader Nancy Pelosi in an official statement. “We continue to call upon the conferees to resolve the remaining issues – extending unemployment benefits and ensuring seniors can continue to see their doctors under Medicare – by February 17. If the Conference Committee is unable to complete its work on a comprehensive bill by that date, the Republican leadership should cancel the recess and remain in Washington next week.”

Her top lieutenant, Minority Whip Steny Hoyer, was more blunt.

“We want to do all three, and we think all three are necessary to do,” he told reporters at his weekly Capitol briefing Tuesday. “If you separate one, then the unemployment insurance and [doc fix] are put in doubt.”

Senate Majority Leader Harry Reid explained why: “I’d rather have the conference committee do it because if conference comes back, it’s a non-amendable item,” he told reporters. “If we get a free-standing bill over here, it’s amendable a thousand times.”

That’s tempting terrain for GOP mischief making. Which is why Sens. Chuck Schumer (D-NY) and Debbie Stabenow (D-MI) met with reporters Tuesday to warn Republicans that threatening the doc fix and UI items will leave them open to sticky political attacks.

Democrats believe that they can find $60 billion worth of financing provisions Republicans support. And they’re prepared, if the conference fails, to tack UI and the doc fix, along with those pay-fors on to a House-passed payroll tax cut bill and call it a day.

“If you’re going to do payroll tax unpaid for it’s logical sense to do UI unpaid for, but certainly there are revenue options, there are mandatory [spending cut] options on the table that could easily pay for it,” Schumer said.

But there’s a lot of underbrush to clear out before we get there. Can House Republican leaders pass an unpaid-for payroll tax cut without touching off an intra-GOP civil war? Will Senate Republicans play along? At a Capitol briefing Tuesday, Senate Minority Leader Mitch McConnell could not commit himself or his conference to a position on an unpaid for payroll tax cut.

Dems would prefer to avoid a protracted and perhaps politically embarrassing amendment process. Republicans may just decide to force this fight anyhow.