A GOP proposal to cut federal pensions is the last major sticking point holding up a payroll tax package deal, according to a Democratic aide.
Democratic leaders are universally opposed to the Republicans' plan to offset an extension of emergency unemployment benefits by cutting some federal pensions – with some saying it's a deal-breaker.
The issue has regional significance for three prominent Maryland Democrats, who represent many federal employees.
Sen. Ben Cardin and Rep. Chris Van Hollen, both members of the payroll tax conference committee, and Minority Whip Steny Hoyer are leading the charge to replace the pension cuts with a reduction in federal pay next year.
"These are hardworking, average Americans who are already contributing $60 billion to deficit reduction over the next decade," Hoyer spokesperson Maureen Beach said in an email. "The time has come to stop targeting these men and women while not asking others to contribute their fair share."
The Maryland Democrats are proposing to offset the unemployment benefits by reducing federal employees' 2013 cost-of-living increase from 1.7 percent to 0.5 percent, according to a source familiar with the talks.
Other Democratic leaders are also raising serious concerns with the pension language. Rep. James Clyburn (S.C.), the assistant leader, said that offset has left him "conflicted" over whether he'd support a final package that included it.
"I have a real problem with beating up on federal employees," Clyburn said. "A lot of us [Democrats] are conflicted."
House Minority Leader Nancy Pelosi (D-Calif.) also pushed back Wednesday against the federal pension offset.
"That's a problem," she said, "but we haven't seen the final version."
The final hurdle remains as lawmakers raced against the clock Wednesday to put the last touches on a payroll tax cut package before day’s end so the House could hold a Friday vote on the measure.
House and Senate negotiators dealing with the payroll tax holiday, emergency unemployment benefits and the Medicare reimbursement rate for doctors were told to be available deep into Wednesday evening, in case they were needed to officially sign off on a conference report.
Aides on Capitol Hill also said that they remained hopeful that a broad deal could be signed off late Wednesday, but some last-minute details still needed to be ironed out.
The action came after GOP leaders on Capitol Hill said throughout the day that an agreement had been reached “in principle.”
Meanwhile, Democrats cautioned into the afternoon that a deal was not yet at hand, and negotiators haggled over details that included how to offset a roughly $30 billion extension of unemployment benefits.
Rep. Dave Camp (R-Mich.), the chairman of the conference committee charged with dealing with the payroll tax, told reporters on Wednesday afternoon that the panel had just an issue or two outstanding.
“I think the plan is to try to finish it this week,” said Camp, who also chairs the House Ways and Means Committee. “I think both sides in good faith are trying to do that. It’s just there always are these final issues that need to be taken care of.”
On one of those final issues, Democrats had said Wednesday that Republicans were reneging on a prior agreement to use $4 billion of new revenue from increased fees that Fannie Mae and Freddie Mac collect from mortgage lenders to help offset the unemployment extension.
Instead, a senior Democratic aide said that Republicans were trying to squeeze more revenues out of proposed spectrum sales to cover the costs, specifically by earmarking less money for a public safety radio channel.
But by Wednesday afternoon, Democrats were saying that other spectrum revenues had been found to help offset the unemployment insurance costs.
The agreement that negotiators were close to finalizing would make around $15 billion in spectrum revenue available to offset unemployment insurance costs and pave the way for a new public safety radio channel for first responders, the senior Democratic aide said.
If all the issues on the payroll tax package were resolved by the end of Wednesday, and the bill was publicly posted before midnight, House rules would allow the chamber to vote on the measure Friday.
House Republican leadership aides have said that, if that were to happen, they believe the measure would pass with strong bipartisan support, though lawmakers on both sides of the aisles have expressed skepticism about the deal.
The deal would also reform the unemployment insurance program, with Democrats saying the maximum number of weeks an unemployed worker could receive benefits would wind from the current 99 down to 73 by the end of the year.
Republicans have said that the vast majority of states would only be able to offer 63 weeks of benefits by the fall.
The third plank of the agreement would avert a 27 percent cut in the reimbursement rate for doctors under Medicare, which would be paid for savings wrung from, among other places, the 2010 health care overhaul, Medicaid and Medicare.
Democrats have noted that the savings do not include means testing for benefits or cuts to beneficiaries.
Some rank-and-file Republicans on Wednesday continued to grumble about the package they had first been briefed on the night before, with lawmakers wishing they had the opportunity to take separate votes on the three items in the conference report.
But after insisting late last year that the payroll tax cut be paid for, GOP lawmakers also appeared to be jumping on board with their leaders’ idea of not offsetting the tax holiday.
Top House Republicans made that concession on Monday, in a signal that they did not want to replay December’s fight over the payroll tax, and GOP lawmakers said Wednesday that party members should back allowing taxpayers to keep more of their own money.
“I think that to get bogged down over a tax cut would be silly on Republicans’ part, and realize that we have other fights to take on to reduce spending in Washington,” said Rep. Marlin Stutzman (R-Ind.).
Some Republicans still expressed concerns about the tax cut’s impact on the deficit and Social Security, and also appeared worried that the reforms to the unemployment insurance program didn’t go far enough.
But Rep. Dennis Ross (R-Fla.), who said he doubted he could vote for the measure, suggested that he understood the Republican leaders’ approach and said he had little doubts the legislation would clear the House.
“It’s damage control,” Ross said. “Whatever little political capital we may have left, we don’t probably want to spend it on this issue.”
“They won’t need my vote,” he added. “If they did, they’d be talking to me.”
Across the aisle, some leading Democrats suggesting Wednesday that the Republicans' proposal to reduce the duration of unemployment benefits might be a non-starter.
“The cut in benefits, from what they currently are to something dramatically less, for me would be unacceptable,” Rep. Xavier Becerra (Calif.), vice-chairman of the House Democratic Caucus, said during a press briefing in the Capitol. “I’m not interested in asking one worker in America to take a cut in his salary or compensation so we can make sure that another American can continue to have a payroll-tax cut or receive his unemployment insurance.”
Still, even some liberal Democrats conceded that the Democrats will have to give up something to secure a deal, and some said they'd likely accept the GOP's UI cuts in order to give President Obama an early election-year victory on his payroll tax cut extension.
"It's gonna be hard not to support the package with 63 [weeks] instead of 93," said Rep. Raul Grijalva (D-Ariz.), chairman of the Congressional Progressive Caucus.
