Unemployment and Taxes: The Fight Resumes

WASHINGTON (AP) -- With television lights glaring, 20 lawmakers will gather next week to revisit the fight that consumed Congress before Christmas over renewing a Social Security payroll tax cut and unemployment benefits.

Little real work will be done, but the meeting will mark the formal start of an effort to untangle a dispute that both parties want to resolve, though for different reasons. Following is a look at the path Round 2 could take, based on interviews with participants on both sides.

Q: Can you remind me what's at stake?

A: After a bitter clash and just a week before a New Year's Day deadline, President Barack Obama and Congress renewed a 2 percentage point payroll tax cut for 160 million workers and benefits for the long-term unemployed through February. They also temporarily forestalled a deep cut in doctors' Medicare fees that threatened to make it harder for the elderly to find physicians who would treat them. Now, the two sides need to figure out how to extend all three measures through 2012 and cover the roughly $160 billion cost.

Q: Are they expected to succeed?

A: Yes, though it will probably take until shortly before the current extensions expire Feb. 29. There are complicated decisions ahead, chiefly what programs to cut and what fees to increase to offset the price tag. Just as important, Democrats won't be in a hurry to finish.

Q: Why not?

A: Republicans took a severe pounding in December when the House GOP resisted a bipartisan, Senate-approved, two-month extension of the payroll tax cut, which was designed to give lawmakers time to negotiate a longer version. With control of the White House and Congress at stake in the November elections, many Democrats think the GOP could incur further damage if these latest talks take time.

Many Republicans doubt the economic benefit of a payroll tax cut, a foundation of Obama's plan to create jobs. But as December's battle unfolded, GOP leaders worried that they would suffer political damage from opposing the deeply popular tax cut, worth $1,000 annually to a family earning $50,000 a year.

With the House's fractious conservative wing balking until the very end, the fight made the GOP look like it was opposing the tax reduction - which Democrats contrasted with Republican support for tax breaks for the wealthy. Most Republicans want this year's fight to end quickly so they can change the subject to their own efforts to cut taxes, federal spending and Obama administration regulations.

Q: How long can Democrats prolong the negotiations?

A: If they're not careful they could overplay their hand.

Democrats scored points last year by forcing Senate votes on their proposal to finance the payroll tax cut with a small surtax on people earning $1 million or more a year. They have a new incentive to do something similar this year with the GOP presidential front-runner Mitt Romney, a wealthy venture capitalist, being cast by party rivals as callous and out of touch.

As a result, many Democrats want to begin this year's talks on extending the Social Security tax cut by targeting the wealthy for a tax increase, perhaps with the millionaire surtax or by limiting their deductions. The millionaire surtax has no chance of passage in the GOP-run House, and Democrats could be accused of blatantly playing politics. Democrats and Obama have a reason to cut a deal: They believe extending the payroll tax cut and jobless benefits will goose the economy and reduce the risk of another economic downturn that could hurt their election prospects.

Q; What will the 20 members of Congress do?

A: House and Senate party leaders each have appointed bargainers to hash out differences over the bill, following Congress' tradition of naming conference committees to craft compromise legislation. But as usual when high-profile battles are being resolved, party leaders will have tight control over the ultimate deal. Still, conference committee members will play a role in writing details, and their endorsement of a package would let leaders argue that they didn't jam something down the throats of rank-and-file lawmakers.

Q: Who are these 20 lawmakers?

A: They range from formidable committee chairmen to lowly freshmen, but each has a stake in the fight.

The chairmen of Congress' two tax-writing committees are included: Rep. Dave Camp, R-Mich., of the House Ways and Means Committee, and Sen. Max Baucus, D-Mont., of the Senate Finance Committee.

Sen. Jon Kyl, R-Ariz., is the Senate's No. 2 Republican and a close ally of Senate Minority Leader Mitch McConnell, R-Ky. Democratic Sen. Bob Casey, facing re-election this fall in the pivotal state of Pennsylvania, has repeatedly been given a visible role in the payroll tax fight by party leaders.

Rep. Xavier Becerra, D-Calif., a party leader, should be a leading opponent of Republican proposals to help finance the plan by effectively denying the child tax credit to many illegal immigrants. Freshman GOP Rep. Nan Hayworth is from a closely contested district in New York's Hudson River Valley.

Hayworth and Rep. Tom Price, R-Ga., are doctors, which could give them roles in the talks involving Medicare. A pair of Maryland Democrats, Sen. Ben Cardin and Rep. Chris Van Hollen, are sure to battle a Republican proposal to make federal employees contribute more to their pensions.

Q: Do they bring other experience to the bargaining table?

A: Seven have participated in recent, failed bipartisan efforts to contain mammoth budget deficits. Those were Congress' supercommittee, talks led by Vice President Joe Biden, the "Group of Six" senators, and a presidential commission headed by former Wyoming GOP Sen. Alan Simpson and former President Bill Clinton's White House chief of staff, Erskine Bowles.

None of those groups succeeded, largely because party leaders could not agree to the controversial tax increases and cuts in entitlement programs like Medicare that would have been required for the trillions of dollars in savings needed.

Far smaller savings are needed to resolve the payroll tax fight, and the consensus is that this time, the president and leaders in both parties want a package that can become law.