Deal reached on payroll tax cut

WASHINGTON – Calling quits to a bruising election-year fight, negotiators on Capitol Hill sealed an agreement late Wednesday on legislation to renew a payroll tax cut for 160 million workers and jobless benefits for millions more.

Sen. Max Baucus, D-Mont., announced the agreement, capping a long day of wrangling over final details of the measure, which is a top priority of President Barack Obama. The announcement paved the way for votes in both House and Senate this week.

The $150 billion measure represents a tactical retreat for Republicans, who were generally unenthusiastic about the legislation but eager to move beyond the issue.

It represented a rare burst of bipartisanship in a bitterly divided Congress.

The legislation would continue a 2 percentage-point cut in the Social Security payroll tax, renew jobless benefits averaging about $300 a week for people languishing for long periods on unemployment rolls and protect doctors from a huge cut in their Medicare reimbursements.

The measure carries a price tag of roughly $150 billion over the coming year, partly financed by new auctions of telecommunications spectrum to wireless companies and by requiring newly hired federal workers to contribute 2.3 percent of their salary toward their traditional defined benefit pensions.

Extending the payroll tax cut and renewing long-term jobless benefits were key planks in Obama’s jobs program, which was announced last September but has been largely ignored since. The measures are intended to help the economy by giving people more money to spend, fattening a typical bimonthly paycheck by $40 or so and giving the unemployed critical cash that most of them turn around and spend immediately.

The measure also includes a key adjustment to the badly broken Medicare payment formula for doctors, which would otherwise impose a 27 percent cut on March 1 under a 1997 budget law. The $20 billion cost would be covered in part by cuts to a fund created under Obama’s health care law that awards grants for preventive care and by curbs on Medicaid payments to hospitals that care for a disproportionate share of uninsured patients.

Republicans claimed victory in reducing the number of weeks of jobless benefits that workers would be eligible to receive. The maximum number in states with the highest jobless rates would be cut from 99 weeks to 73 weeks by the end of the year, according to aides in both parties.