How Congress Can End the Payroll Tax Impasse

Republican House leaders have defeated a two-month extension of the payroll tax, throwing Capitol Hill into chaos. John Batchelor on how the deal went off track—and the scenarios for saving face by Christmas.

With the sands running out till the glass reaches 2012, the fate of the so-called payroll tax and pipeline deal on Capitol Hill is a tale of disorder and disunion not only between the warring states of the Republicans and Democrats but also among intramural factions within each party.

The next few days till Christmas will reveal the battle plan for all sides; however, as of this morning, there is clear indication that the leadership of both parties is unsure of its membership and without a certain endgame.

The incoherence is a major surprise to the Republican House leadership of John Boehner and Eric Cantor. The Tea Party–powered House majority passed the bill it liked last week, including the housekeeping details on Medicare, the extension for long-term unemployment benefits, the payroll tax-cut extension for a year’s time, and the all-important Keystone XL Pipeline mandate for the White House. Called H.R. 3630 “Middle Class Tax Relief and Job Creation Act of 2011,” it was sent to the Senate for a vote on the weekend, and that is when the communication broke down between Republican leaders in the House and Senate, and then with the flabbergasted Republican House members.

“I don’t know what happened,” a veteran Republican with close working knowledge of the House leadership remarks. “But something went wrong between when we sent it over then and when McConnell made a deal with Harry Reid. Harry Reid knew he couldn’t stop the pipeline. It’s too popular with his own members. So we got that. But suddenly the Republican Senate is trading away the year payroll tax extension for a two-month extension. Why? Who approved that?”

Another GOP member said, “The guys in the purple robes, they vote for anything so they can get to the beach at Aruba or somewhere.” Said a third member: “They probably drew it up on a cocktail napkin, and no one checked with anyone with common sense. Two months!”

On Saturday, the Senate voted 89–10 for its version of the bill, which included the peculiar decision to foreshorten the critical payroll tax extension from all the way past the next election to February 2012.

The House members say they saw no evidence that the Senate Republicans checked with any businesspeople knowledgeable of how payrolls work before deciding on such an impractical scheme. It became evident to them that the two-month deal was in fact the deal-breaker.

“I went to coffee and then lunch with constituents, businessmen,” says a Republican member from the West, “and they're telling me right away that two months is crazy. They're hammering me. It was awful. I hadn’t had enough sleep anyway. I thought I was done for Christmas. And it was a disaster. Then we had the conference call with all the members. I heard the same thing from everyone on the conference call with the leadership. Two months is nuts. No one says it can work.”

Late Sunday night, the order went out from Majority Whip Kevin McCarthy’s office that members must break off their family Christmas plans and rally in Washington for wrangling and blame shifting. By late Monday, the House GOP was firmly entrenched: no surrender down from the bill they passed, with the yearlong extension and the pipeline in place. And they’re prepared to fight throughout the holiday season.

The Democrats are equally disorderly yet dug in. The Senate deal caught the House Democratic leadership unaware that the House GOP was opposed. On Monday, following the House revolt, a GOP member tells me that Minority Whip Steny Hoyer showed signs of worry. With several Republicans sitting in the Cloak Room, chatting about the leadership's blind spots, a cellphone call came in to one member from Steny Hoyer, asking for his vote for the Senate plan. Hoyer said he was looking for 40 Republican votes to help his minority pass the bill.

“It’s embarrassing,” describes the observer, “to see Steny Hoyer begging for our guys to vote with him. Forty of them! It’s not just desperate, it’s stupid.”

Stranger still, Minority Leader Nancy Pelosi has said she will refuse to name conferees to negotiate with the Senate, throwing a twist into the mix when it reaches the possibility of a conference to resolve the conflict.

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What is certain right now is that the House GOP will vote to reject the Senate version of the bill and then will resubmit the same bill from last week, without changes.

At this point, there are three options before the midnight Dec. 31 deadline for the payroll and pipeline deal.

First, in the best-case scenario, the House Republicans will send the Senate the original bill. The Senate will use unanimous consent to appoint conferees to meet with the House conferees next week, and there will be a final vote by year’s end to do the right thing, extend the payroll tax and push the Keystone XL Pipeline to construction.

Second option: neither the House nor the Senate will appoint conferees; instead, Boehner and Cantor will go into a smoke-filled room with the Senate leadership and work out a deal that all sides can accept. As one House Republican tells me, with this option, “Harry Reid will eat the pipeline, and we'll get the year's extension.”

The third option is WMD, with Nancy Pelosi refusing to deal with conferees, with the White House refusing the pipeline deal, and with the president going on the offensive, accusing Republicans of sabotaging the Senate’s 89–10 comity, and accusing the Republican House of extremism.

The third option is the same as setting Washington on fire for the New Year, but this is an annual fete; and both parties, and all the hardened partisans within the parties, are eager to fight tooth and claw until Election Day, so best to start at the stroke of midnight with a mutual-destruction opera.