‘Payroll Tax, The Sequel’: Did either side learn any lessons from Part 1?

Congress took its impasse over payroll tax cuts and other expiring provisions to the brink of raising taxes for some 160 million Americans, before House Speaker John Boehner gave in.

Now, with barely a pause, it all begins again.

Both Republicans and Democrats are assessing the fallout from a standoff that drove Congress’s approval to record low levels – and bumped President Obama to his highest approval ratings in 12 months.

Some 47 percent of Americans approve of the way the president is handling his job, according to a Gallup poll released on Tuesday. That’s up five points since the standoff with House Republicans over the payroll tax cut began.

By contrast, Congress wound up the year at an 11 percent approval rating – its lowest level since the Gallup organization began asking the question in 1974. Polls signal that the public blames Republicans more than Democrats for the dysfunction on Capitol Hill.

The deal that broke the impasse, first proposed by Senate Republican leader Mitch McConnell, extends expiring provisions for two months. It also commits House and Senate negotiators to work out a full-year extension of the payroll tax “holiday,” as well as expiring federal jobless benefits and a “fix” to block a 27.4 percent cut in payments to doctors serving Medicare patients.

But congressional leaders are signaling that key issues once viewed as resolved are back on the table for a new round of negotiations, casting doubt on whether a deeply divided Congress can – or even wants to – agree on the expiring provisions before the 2012 elections.

A key sticking point is how to pay for the $100 billion needed to extend these provisions for the balance of 2012. In the run-up to the two-month deal, Democrats publicly set aside demands to pay for extending the payroll tax cuts with a surtax on incomes over $1 million – a nonstarter for House Republicans.

On Friday, Senate majority leader Harry Reid (D) of Nevada told reporters that he had instructed his four Democratic conferees to allow “nothing off the table,” including higher taxes on the rich. “I’ve talked to Senate Republicans, plural, who think that that there should be a fair tax on rich people,” he said in a briefing on Dec. 23. “I am going to make sure that my conferees understand that that could be part of what we try to do, and we’ll see what happens.”

At the same time, Senator Reid said that Democratic negotiators would be revisiting a provision in the two-month agreement that calls for reducing federal jobless benefits from 99 to 79 weeks. “We couldn’t get it done otherwise,” he said. “And so we’ll come back and revisit that.”

On the House side, Speaker Boehner is trying to rebuild consensus on a way forward within a divided GOP caucus that includes an 87-member freshmen class, many elected with tea party support. In a conference call on Dec. 17, rank-and-file Republicans rejected Boehner’s advice to see the Senate’s two-month extension as a victory – or at least the best Republicans could hope for at that time.

Many, including some other members of GOP leadership, pushed for a fight with the Senate, including with Senate Republicans seen as betraying conservative principles in the interest of getting out of town for the holidays.

After a raucus caucus meeting on Tuesday, the House voted to reject the Senate bill and call for negotiation on a one-year bill before the holidays. Boehner appointed conferees and called on the Senate to do the same.

This time, neither Senate Democrats nor the White House backed down. In a conference call two days later, Boehner told the caucus that they had “fought the good fight,” but were now in an unsustainable position. The issue needed to be resolved, he said.

Several GOP freshmen expressed outrage at the Speaker’s capitulation and threatened to oppose the unanimous consent vote last Friday that sealed the deal. But no Republican made good on that threat.

“If anyone really thought it was so bad, it only took one person with two words to stop it: ‘I object,’ ” says Rep. Jack Kingston (R) of Georgia.

“There has been a lot of press chatter about Boehner being in trouble, but there’s no evidence of it,” he adds. “No one is saying: I’m going to run against Boehner or I’m going to recruit [someone else to run].”

Still, House Republicans took a battering, even from conservative critics, for a standoff over a payroll tax cut that became a debacle. “Republicans were made to look like they’re anti-middle class,” says pollster G. Terry Madonna, professor of Public Affairs at Franklin & Marshall College in Lancaster, Penn. “Politically, they got chewed alive by it,” he added.

“Many of the [GOP] freshmen are not used to living to fight another day,” he adds. “They think they were elected to come and take the hard line, but the problem is they only control one chamber.”

Moreover, with Senate Democrats taking a harder line going into a new round of negotiations, all bets are off on how quickly House and Senate negotiators will be able to come to terms.

“Both sides were close in December so there's no reason why this payroll bill can’t be resolved quickly in January,” said Kevin Smith, a spokesman for Boehner, in an e-mail.

“There is bipartisan support for extending payroll tax relief for a year, extending and reforming unemployment benefits, and offsetting the cost with spending cuts, while there is bipartisan opposition to tax hikes,” he added. “As long as Democrats come to the table in good faith, this can be resolved rather easily.”