Democrats have been claiming for weeks that they have the upper hand in negotiations over how to extend the payroll tax cut through 2012. They proved that claim Monday. After negotiations between the two parties seemed hopelessly bogged down over details, GOP leadership caught many people off guard Monday by announcing the preparation of a backup plan to extend a two percentage point tax cut until the end of the year without offsetting its cost. Recently claiming that the standoff was due to Democratic insistence that the proposal include tax hikes, Monday was a dramatic reversal for Republicans, who have long claimed that the measure should be paid for with cuts elsewhere in government.
While the GOP claimed their reversal was due to Democratic unwillingness to "negotiate in good faith," Senate Democrats could barely contain their glee over the GOP's new proposal, privately touting the move as a political concession.
"Republicans know their ongoing hand-wringing on getting their members to support this tax cut is a loser for them," says one Democratic aide with knowledge of the negotiations. "Seems like this is their latest way out."
According to another Democratic aide, Republicans made the offer over the weekend and Democrats considered it to be a "breakthrough."
House leaders said they would set the proposal for a vote later this week unless there was progress in the negotiations in the conference committee, the formal process for resolving differences between Senate and House bills.
"Unfortunately, to date, Democrats have refused virtually every spending cut proposed – insisting instead on job-threatening tax hikes on small business job creators – and with respect to the need for an extension of the payroll tax cut, time is running short," according to a statement from Republican leadership.
With the payroll tax issue out of the equation, the conference committee will still have to resolve how to continue extended unemployment benefits through 2012, as well as some adjustments to payments for Medicare doctors, both of which must be resolved by the end of February. Some Republicans feel they have the upper hand in those negotiations.
"We can continue demanding spending cuts, welfare reforms, and a more sensible duration of unemployment benefits in exchange for other things," says one Republican aide.
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