Deal would extend jobless benefits, prevent Medicare cut

One day after House Republican leaders made a major concession on the payroll tax cut, congressional negotiators struck a tentative deal that also would extend long-term unemployment benefits and prevent drastic reductions in doctors’ Medicare payments.

The breakthrough on the three-prong package occurred after a tumultuous 24-hour period that began when House Speaker John A. Boehner (R-Ohio) and his lieutenants abandoned their insistence that the extension of the $20-a-week tax cut be paid for with spending cuts.

The shift, although greeted skeptically by rank-and-file Republicans, enabled GOP leaders to kick-start stalled talks with Democrats over a broader measure that Congress could pass by the end of this week. That would give President Obama a victory on his top legislative priority for the year, and end a debate that polls suggest has taken a toll on the GOP.

The payroll tax cut and long-term unemployment benefits are due to expire at the end of the month, and Medicare payments to doctors are scheduled to drop more than 27%. With Congress scheduled to adjourn for a weeklong Presidents Day recess, all sides want to avoid the appearance of being on vacation while workers see a tax increase or jobless Americans go without benefits.

During a White House event Tuesday morning aimed at keeping the pressure on Republicans, Obama accused the GOP of holding up the tax break for 160 million working Americans, some of whom flanked him. He shared their stories about the difference the extra cash is making in their lives, and urged Americans to prod Congress to approve the tax break, which some economists say is helping to stimulate the economy.

“As you guys know, you can’t take anything for granted here in Washington until my signature is actually on it,” Obama said. “So we’ve got to keep on making sure that the American people’s voices keep breaking through until this is absolutely, finally, completely done.”

Boehner made his own forceful case to his fellow House Republicans behind closed doors Tuesday evening. He said that he understood not all lawmakers would be pleased with the deal, but that it was time to fight other fights, according to people familiar with the private meeting who were not authorized to speak about it on the record.

Several lawmakers spoke against the tentative agreement, underscoring the political difficulty Boehner may once again face in gathering votes. Republicans have never fully embraced the payroll tax cut, and for months have said that it must be paid for with spending cuts. That’s despite the fact that Republicans have long argued that tax cuts pay for themselves by spurring the economy and creating new revenue.

The payroll tax cut trims the contribution that workers pay into Social Security by 2 percentage points. Republicans have complained that, without offsetting cuts, the lost retirement revenue would have to come from the general fund when the country can’t afford it.

Many Republicans still have that concern, but found Boehner’s broader message convincing.

“We can understand why the president would want us to rehash it over and over again,” said Rep. Tim Walberg, a freshman from Michigan, who was withholding his vote until he saw the final deal. “It’s not perfect, but it’s a step forward.”

Under the outlines of the agreement, the payroll tax cut would be extended until the end of the year, adding $100 billion to the federal deficit, according to aides.

Spending cuts and new revenue would offset the costs of continuing long-term unemployment insurance and preventing a Medicare pay cut for doctors. But the Democrats’ proposal that the cost of the measure be underwritten by new taxes on those making more than $1 million a year would not be included.

Instead, the more than $50 billion in costs for the unemployment benefits and Medicare provisions would be covered by reducing federal workers’ compensation and trimming health accounts, including the prevention and public health fund that is part of the nation’s new healthcare law. Revenue would be raised by leasing federal communication avenues.

The GOP push to alter the unemployment insurance program had mixed results.

The 99-week maximum for unemployment benefits would be reduced. By the end of the year, no states are expected to have an unemployment rate high enough to qualify for the maximum benefit, leaving jobless residents of most states with about 63 weeks of benefits, according to those familiar with the talks.

The deal does not require recipients of unemployment benefits to pursue a high school diploma, as Republicans had wanted.

Another point of contention remained up in the air. GOP aides and lawmakers said the tentative agreement would allow states to perform drug tests on recipients, but Democrats disputed that.

lisa.mascaro@latimes.com