What Extending Payroll Tax Cut, Jobless Benefits Would Mean for Americans

JEFFREY BROWN: After days of deadlock, there were signs today that Congress may be near agreement on extending payroll tax cuts and jobless benefits for the rest of the year.

Judy Woodruff has the story.

JUDY WOODRUFF: Last night, House Republicans dropped a demand that the $100 billion tax cut be paid for. And this evening, congressional aides suggested the deal could include long-term unemployment assistance as well, plus money to block a cut in Medicare payments for doctors.

For what's been happening behind the scenes on Capitol Hill, we're joined now by Todd Zwillich. He's a reporter with "The Takeaway" on WNYC Radio. And he's been tracking the negotiations.

Todd, it's good to have you with us.

TODD ZWILLICH, "The Takeaway": Good to be with you.

JUDY WOODRUFF: Again, this has all happened very quickly.

First of all, why did Republicans change their minds about this payroll tax cut?

TODD ZWILLICH: Democrats have been tasting blood in the water frankly, Judy, ever since December, when they were fighting over an extension of the payroll tax then. Republicans found themselves on the wrong side of that debate.

There's consensus in Washington that they lost terribly. All they landed on at that time was a two-month extension. That same payroll tax extension was going to expire at the end of this month, indeed still is going to expire at the end much February.

Republicans, I think sensing that they didn't want to be on the wrong side of this issue again, as it was tied in also with other issues, unemployment insurance and other issues that people in a bad economy would be sensitive about, decided to take one of the big Democratic weapons off the table, the extension of this payroll tax cut.

Let's keep in mind very quickly payroll taxes are usually 6.2 percent of your paycheck. They lowered it to 4.2 percent for the average worker. That's about $950 or $1,000 a year. It's substantial.

JUDY WOODRUFF: It affects, I was just reading, about 160 million Americans. So this is not an insignificant step.

TODD ZWILLICH: Correct.

JUDY WOODRUFF: Now, separately, there were these negotiations that have been going on over the unemployment insurance extension and also over the so-called doc fix, Medicare payments to doctors.

How has that all been or almost been resolved on a separate track here?

TODD ZWILLICH: The payroll tax cut, Judy, was the most controversial and politically potentially toxic part of this for Republicans, or politically beneficial if you're a Democrat.

Once that was taken off the table, these other things that you mentioned seem to become possible very quickly. Democrats have always wanted, indeed, have always lobbied, for an increase -- for an extension, rather, in unemployment insurance benefits, especially in a bad economy. They don't want to see people going off those unemployment rolls.

Also, it has a bad impact on the economy, when people living on the cusp no longer have money to spend on the electric bill or groceries. The big controversy which actually Republicans had won a long time ago was whether or not to have this paid for. Yes, we can extend unemployment insurance, but do we pay for it with cuts elsewhere?

Democrats had always said no. The deal that they appear to be nearing tonight -- and they're actually talking to members almost as we speak right now about a potential deal -- does pay for about a 63-week unemployment extension for most states. It goes up as high as 79 weeks in other states with higher unemployment.

So both sides get a win here. The Democrats get an extension in unemployment benefits that they say is necessary to keep the economic recovery going. Republicans get to say, yes, but it's paid for. It's paid for with cuts elsewhere in the budget.

JUDY WOODRUFF: But, on balance, is the deficit going up or staying the same as a result of all this?

TODD ZWILLICH: On balance, the deficit is going up $100 billion because the Republican give yesterday, the Republican relent on this was unpaid for, the payroll tax cut extension to the end of the year unpaid for. That's on the deficit.

JUDY WOODRUFF: And this was an agreement made by the Republican leadership. What about the Republican rank-and-file?

TODD ZWILLICH: Well, this is always a potential difficulty for Republican leaders. And time after time in these big high-profile deals, especially when they have to do with spending and deficits, there are always a large group of Republican conservatives who revolt.

They didn't want a payroll tax cut extension, many of them, at all. I expect many of them will vote against this deal, but Democrats will vote for it, according to Leader Pelosi this afternoon. So it's likely to pass, whether they have to do the payroll tax cut extension on its own and do the other things separately or, as they would like to do, wrap everything into one nice package of the doc fix, as you mentioned, unemployment insurance, payroll tax extension, enough votes to pass it.

The president is happy. He said, pass this tax cut. Everybody, if they don't lose, they at least get a win.

JUDY WOODRUFF: And just quickly, Todd Zwillich, is this a sign that there is going to be more cooperation on the Hill this year or a sign that maybe this is the last gasp of an ability to work together?

TODD ZWILLICH: I think it's probably the latter. There aren't a lot of signs that there's going to be really any substantive legislation between now and the election.

Washington has already agreed that the big issues, deficits, debt, entitlements, have to be solved by the voters. Politicians need to be told what to do about these big issues. This showed some cooperation because both sides seemed to have -- Republicans in particular lost their appetite for confrontation as we get closer to the election.

I wouldn't expect this to be a recipe for further cooperation, because they would actually have to some have something substantive to vote on. And that is looking increasingly unlikely.

JUDY WOODRUFF: Todd Zwillich, thanks very much.

TODD ZWILLICH: My pleasure.