The clock is ticking for lawmakers to extend the payroll tax cut before the end of the year. President Obama threatened to cancel Christmas for Congress if they failed to pass an extension, arguing that America's economic recovery is at risk without it. If the cuts expired, employees would see an increase in taxes on their paychecks that is expected to cost the average household $1,000. Though most politicians on both sides of the aisle agree the tax cut should be extended, the main point of contention between Democrats and Republicans is how to pay for it. Senate Democrats would like to subsidize the extension with a 2 percent surtax on millionaires. House Republicans, asserting that such a tax would hinder job creation, propose freezing federal workers' pay and make money-saving adjustments to entitlement programs. Republicans also suggested passing the extension in exchange for the approval of the controversial Keystone XL pipeline (which some Democrats also support). Now that Obama has made it clear he would sign no such bill, the heat is on for congressional compromise, and Senate Democrats are considering abandoning their millionaire surtax as a last ditch to get GOP support.
At the end of a year of multiple high-stake stand-offs between Democratic and Republican lawmakers, both sides want to go into the 2012 election year looking like the reasonable party in the debates, especially as Congress faces a dismal public approval rating. House Speaker John Boehner has dealt with a volatile pack of freshman Republicans, motivated by the Tea Party movement, who object to any legislation that would add to the federal deficit. Meanwhile, Democrats have struggled to co-opt the energy of Occupy Wall Street, the Tea Party's rival populist movement. The millionaires tax is popular among Americans, even among some millionaires. Yet, as Rick Newman explains, raising taxes on the rich is very difficult politically, and Democrats may back down in order to head off another widely disdained Washington stalemate.
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