Tax cut deal boosts retirement contributions for new feds

Carolyn Kaster/AP

Late Wednesday night, congressional negotiators said they had reached an agreement that extended the payroll tax holiday for millions of Americans. The deal came after a roller coaster day of negotiations, less than 24 hours after a tentative agreement had been struck. The emerging compromise had earned the wrath of conservatives who don't like that the payroll cut will not be offset with spending cuts and liberals wary of federal workers having to cough up more benefits to cover the package's extension of unemployment benefits and a patch for the so-called doc fix that would have left physicians with a substantial cut in their Medicare reimbursements.

The Associated Press reported that a late dispute arose over a proposal to cover $15 billion of the $30 billion cost of extending unemployment benefits by requiring federal workers to contribute an additional 1.5 percent of their pay to their pensions. Key Democrats opposed the move, and it was changed to target only newly hired federal employees, who would be required to contribute 2.3 percent of their salaries toward their pensions.

The measure is headed towards a vote before Congress leaves town for a District Work Period perhaps as early as Friday but quite possibly Saturday if lawmakers hew to the rules about allowing enough time for members to read pending legislation. Given the near-death experience with so many important funding bills over the past year, no one is taking passage for granted although at least at this point it appears more likely than not.

The deal, such as it is, seems like less of a triumph for Congress than the mere prevention of disaster. Neither party had wanted to see the payroll tax go up in an election year with a weak economy nor did they want unemployment benefits to cease. So they've emerged with something that can tide them over until after the election. But it's worth remembering that this patch comes after the previous two-month patch that came about after another stand off. A lasting accord this is not. It does, though, represent something of a capitulation by Republican leaders who had insisted that any payroll tax cuts be offset with spending cuts. This had earned the ire of many conservative lawmakers over the past two days. It remains to be seen whether enough Democrats will join with compromise-supporting Republicans to get a bill to the president's desk. 

For his part, President Obama reportedly weighed in on the measure last night, calling wavering Democratic lawmakers who were resisting the costs being imposed on federal workers. He got them to agree, showing how eager the White House is not to see payroll taxes go up. Meanwhile, all millions of Americans can do is watch and see if their weekly paychecks shrink because Congress couldn't close a deal that everyone wanted.

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