Boehner Signs On to Payroll Tax Deal Amid Isolation, Attacks

December 26, 2011, 3:15 AM EST By Steven Sloan and Laura Litvan

Dec. 23 (Bloomberg) -- Deserted by many of his fellow Republicans, U.S. House Speaker John Boehner surrendered to attacks from President Barack Obama and congressional Democrats and agreed to a two-month extension of a payroll tax cut that he derided hours earlier.

The decision kicks the fight over extending the tax cut for 160 million U.S. workers into early next year without resolving deep divides over how to cover the cost through 2012.

Democrats are focused on imposing a new tax on income exceeding $1 million while Republicans want to cut the federal work force and freeze pay for government workers. Republicans also want to attach policies to a payroll tax cut extension -- opposed by Democrats -- such as a rewrite of the unemployment system or weaker rules for industrial emissions.

The deal that Boehner and Senate Majority Leader Harry Reid, a Nevada Democrat, agreed to yesterday includes language that calls on Obama to accelerate approval of the Keystone XL Canadian oil pipeline. Both chambers plan to pass the tax cut deal today by unanimous consent, which means most lawmakers won’t have to return to Washington over the holiday recess.

Boehner could be in a weaker position entering the 2012 negotiations after presiding over the tumult of recent days, in which Senate Republicans opposed Boehner’s stance and some House Republicans had begun to defect as well. The talks next year will unfold in the months ahead of a presidential election, making Boehner’s task more difficult.

No Time for Celebration

“I don’t think it’s a time for celebration,” the Ohio Republican told reporters yesterday. “Our economy is struggling. We’ve got a lot of work ahead of us in the coming year.”

After days of relentless attacks from Democrats and negative headlines in the press, some Republicans were pleased to see Boehner cut his losses.

“The great danger would have been if we continued,” said Representative Tom Cole of Oklahoma. “We made our points. We’ve gotten some modifications.”

The pressure for Boehner to cut a deal was building for days. Republican Senators Olympia Snowe of Maine, Scott Brown of Massachusetts, John McCain of Arizona and Bob Corker of Tennessee, criticized Boehner’s move to reject the bipartisan two-month extension after it passed the Senate on Dec. 17, just two weeks before the tax cut was set to expire.

Isolation in Opposition

Boehner became more isolated in his opposition to the Senate-passed bipartisan bill after the top Republican in the Senate, Mitch McConnell of Kentucky, issued a statement before lunchtime yesterday urging the House to pass the short-term measure.

McConnell said the House should pass a bill that averts “any disruption in the payroll tax holiday or other expiring provisions and allows Congress to work on a solution for the longer extensions.”

That statement “sealed the deal” in ending the standoff, said Brian Gardner, the senior vice president for Washington research at KBW Inc.

Boehner held a conference call with Republicans yesterday. On a similar conference call following the Dec. 17 Senate passage of the two-month extension, rank-and-file Republicans pressed Boehner to oppose the measure. They did so on Dec. 20 as the House rejected the Senate bill 229-193.

Different Tone

House Republicans who participated in yesterday’s call said the tone was much different than after the Senate vote.

“It wasn’t truly a conference call,” Representative Jack Kingston, a Georgia Republican, said. “It wasn’t a solicitation of opinion.”

Though most House Republicans still want a yearlong deal, Kingston said that it was time for the party to move forward.

“This takes the whole thing off the front page and that’s a good thing,” he said.

Some House Republicans said yesterday they don’t think Boehner’s agreement to pass the two-month extension puts him in immediate danger of losing the support of the Republican majority he leads.

Representative Sean Duffy, a freshman Republican from Wisconsin, said Boehner was trying to reflect the views of his colleagues. Duffy said he is pleased that a tax increase will be avoided in January and doesn’t think the saga would hurt Republicans in the 2012 election.

“I think the American public will look at the economy and job growth and the lack thereof,” Duffy said. “I don’t think this is an indicator of what will happen next year.

Provisions Extended

Without congressional action, the payroll tax for employees would rise in January to 6.2 percent from the current 4.2 percent. The tax funds Social Security. The deal also averts an end to emergency unemployment benefits set to expire on Dec. 31 and assures doctors their Medicare reimbursement rates won’t be reduced starting in January.

Michael Feroli, JPMorgan Chase & Co.’s New York-based chief U.S. economist, said economic growth would be reduced by 0.5 percentage points in the first quarter and 1.5 percentage points in the second quarter of 2012 if the payroll tax cut and expanded unemployment benefits weren’t continued. If they are extended for the year, he expects growth of 2.5 percent in the first half of the year, he said in a Dec. 16 note to clients.

House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, will introduce the legislation in the House today that will implement the agreement.

Unanimous Consent

The measure will be brought up in the House under unanimous consent to avoid requiring lawmakers to return and could be cleared in the Senate later in the day using the same process.

The legislation includes one difference from the version passed by the Senate. A yearlong payroll tax cut extension would apply to the first $110,100 in wages. To prevent someone from shifting all their income into the first two months of the year, the Senate bill limited the tax break to the first $18,350 a worker earns.

Republicans changed the bill to apply the tax cut to the full $110,100 in wages, according to information provided by Camp’s office. That makes it easier for payroll processors to continue the tax cut if it is extended beyond February.

Workers who earn more than $18,350 during the first two months of the year will pay an additional 2 percentage point tax when they file their returns in 2013.

The bill is HR 3630.

--Editors: Jodi Schneider, Jim Rubin.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Boehner: Obama Must Take Part in Debt Talks

June 02, 2011, 12:25 AM EDT By Julie Hirschfeld Davis and Catherine Dodge

June 2 (Bloomberg) -- House Speaker John Boehner, intensifying pressure for a quick and far-reaching deal to slash U.S. government spending, said “it’s time” he and President Barack Obama get personally involved in talks on a broad debt- reduction package.

Boehner, voicing concerns that bipartisan negotiations led by Vice President Joe Biden are proceeding too slowly, said the White House and Congress should strike a deal within a month to avoid a continuing impasse over raising the nation’s $14.3 trillion debt ceiling that could spook investors and lead to an unprecedented government default.

The Biden-led talks “are making some marginal progress, but at the rate that that’s gone, we’ll be right up against the wall,” Boehner told reporters at the Capitol yesterday. “This really needs to be done over the next month if we’re serious about no brinksmanship and no rattling investors.”

Treasury Secretary Timothy Geithner is already using what he calls “extraordinary measures” to avoid exhausting the nation’s borrowing authority, and he has said that he will run out of options for avoiding default by Aug. 2. Boehner said he was worried that the Biden-led discussions would go down to the wire, putting Congress up against that date.

Obama “understands that we need this finished over the next month -- he said so this morning” at a private meeting he hosted for House Republicans on the debt impasse, said Boehner, an Ohio Republican.

‘Play Large Ball’

Asked what more could be done to prod a compromise, Boehner said: “The president could engage himself. I’m willing. I’m ready. It’s time to have the conversation. It’s time to play large ball, not small ball.”

Boehner’s comments raised the possibility that the current debt stalemate could culminate in the coming weeks in the year’s second high-level negotiation between Obama and Republican leaders on spending cuts. Obama and Boehner hashed out the final details of an agreement on the 2011 federal budget face-to-face at the White House in April, agreeing to about $38.5 billion in reductions with just hours to spare before a government shutdown.

Responding last night to Boehner’s comments, White House spokeswoman Amy Brundage said Obama is “closely monitoring” the Biden talks and is being “regularly briefed’ on their progress. ‘‘Both parties acknowledge that the group is making progress and talks are productive,’’ she said.

White House Session

Boehner made his comments a few hours after the 75-minute meeting Obama convened at the White House with Boehner and his colleagues to discuss the two parties’ differences over the government’s finances. After the session, Republicans said they had criticized the president’s description of their Medicare privatization plan, calling it unfair, and pressed him to offer his own proposal for tackling the debt.

Boehner described the session as ‘‘a very good meeting. It was frank, to-the-point, it was polite,” he said.

Still, House Republicans emerged indicating that they broke no new ground in talks to raise the nation’s debt ceiling in exchange for reductions in government spending.

“Unfortunately, what we did not hear from the president is a specific plan of his to deal with the debt crisis” that could be evaluated by the nonpartisan Congressional Budget Office, Representative Jeb Hensarling of Texas, head of the House Republican Conference, told reporters at the White House after the meeting.

Republican Frustration

Representative James Lankford, an Oklahoma Republican, said his colleagues are frustrated because they believe the administration isn’t offering ideas publicly on how to reduce the deficit, as Republicans did in April as part of a much- criticized budget plan to cut more than $6 trillion over a decade.

Obama wants to work behind closed doors on a plan that can clear Congress so that he can “step out front at the end of it and say ‘I led this,’” said Lankford.

“We have three co-equal branches of the government here, and one of them is sitting and waiting to follow,” he said.

House Budget Committee Chairman Paul Ryan said he confronted Obama about how the president was characterizing the plan Ryan wrote to privatize Medicare, the government health- insurance plan for older Americans, by giving people subsidies to buy coverage.

‘Demagogue’ Debt Efforts

“We’ve got to get our debt under control, and if we try to demagogue each other’s attempts to do that, then we’re not applying the kind of political leadership we need to get this economy growing,” Ryan, a Wisconsin Republican, told reporters.

Obama said there had been demagoguery on both sides, Boehner told reporters later at the Capitol, adding, “But if we’re going to change the process, it’s got to start from the top.”

White House press secretary Jay Carney said Obama “has clearly led” on deficit issues and cited the debt-reduction commission the president established last year and a plan he outlined in an April speech to cut $4 trillion in cumulative deficits within 12 years.

“His proposal is out there and I think pretty extensive,” Carney told reporters at yesterday’s White House briefing.

Carney dismissed the notion that Obama was distorting Ryan’s Medicare proposal.

‘Significant Issues’

“There is no question that on the issue of Medicare, we have significant differences,” Carney said. “And what the president has made clear is that he doesn’t believe that we need to end Medicare as we know it.”

Boehner and other Republican leaders said the private session in the White House’s East Room yesterday largely focused on the impact of the government’s debt on the economy and jobs.

“If we’re going to get serious about creating jobs in America, we’ve got to reduce some of the uncertainty” within the business community, Boehner said outside the White House. “Some of that uncertainty is caused by the giant debt that is facing our country.”

Biden’s negotiations over increasing the debt ceiling as part of a package of spending cuts began May 5. There have been four meetings between the vice president and six congressional leaders, with the next one set for June 9. Biden has said that progress is being made and that negotiators are trying to find savings of $1 trillion over 10 years.

House Majority Leader Eric Cantor, a Virginia Republican, said he asked Obama to work with Republicans on a “tax reform plan” that is being put together by Ways and Means Committee Chairman Dave Camp, a Michigan Republican.

Tax Issue

He also asked the president to steer clear of “any notion that we’re going to increase taxes” as part of any agreement on raising the debt limit

“It’s counterintuitive to believe that you increase taxes on those individuals and entities that you are expecting to create jobs,” Cantor said.

Boehner said he stressed to Obama that now “is the moment” to deal with the deficit issues facing the government. “We can work together and solve this problem,” he said. “Let’s not kick the can down the road one more time.”

Obama is to meet with the House Democratic caucus at the White House today. Separately, Geithner is scheduled to meet on Capitol Hill with freshman members of the House to discuss the debt limit, one in a series of sessions he has been holding with lawmakers to explain the issue, according to the Treasury Department.

Amid Washington’s debate about the debt, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago. The yield on the benchmark 10-year Treasury note fell below 3 percent yesterday for the first time in 2011, according to Bloomberg Bond Trader prices.

--With assistance from Brian Faler, Roger Runningen, James Rowley and Cheyenne Hopkins in Washington. Editors: Don Frederick, Leslie Hoffecker

To contact the reporters on this story: Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net; Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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