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Rift will remain in January, experts say

 WASHINGTON – Congress on Friday quickly and quietly approved a two-month extension of the Social Security payroll tax cut, assuring that more than 160 million people will avoid a 2 percentage point payroll tax increase next year.

 But the calm, collegial legislative day was deceptive. When lawmakers return in January, they’ll remain far apart on agreeing to a longer-term deal.

 Negotiators from each chamber are expected to convene in early January to pursue a compromise. The senators and representatives chosen are staunchly loyal to party leaders and their party lines.

 There are three major areas of disagreement:

  • Paying for the breaks. Democrats, including Obama, wanted a surtax on millionaires. The Senate, on largely party-line votes, rejected that idea. House Republicans countered with a series of proposals that Democrats found unpalatable, including a federal pay freeze.

 The current two-month package, costing an estimated $33 billion, will be funded by raising fees levied by mortgage giants Fannie Mae and Freddie Mac. But just preserving the Social Security tax break alone for a year will cost an estimated $112 billion.

  • Revamping the unemployment benefits system. House Republicans want to reduce the maximum number of benefit weeks to 59 and make other changes. Democrats have resisted.

  • Protecting the Social Security trust fund. Another year of payroll tax breaks means less revenue for the trust fund, a serious concern for many in both parties. Supporters of the tax break insist there’s no risk to the fund because the Treasury will make up lost revenue. Opponents say that breaks the trust created by having a designated tax paying for the benefits, which beneficiaries had paid in all their lives.



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