On Payroll Tax Cut, Obama Administration Plotting Year-End Showdown

WASHINGTON -- Top officials in the Obama administration on Thursday outlined a major end-of-the-year push to pass an extension of the payroll tax cut, pledging to make Republicans take a political hit for inaction.

In a background briefing with reporters, two senior administration officials repeatedly warned they would make an example of GOP lawmakers adjourning in December without acting on that major component of the president's job package.

"I think it is going to be very dramatic as we count down towards the end of the year and the clock is ticking on whether the average person's taxes are going to go up $1,000 next year," said one official. "It is going to be certainly an organizing principle and a focusing principle for this debate, and we are going to make the argument as clearly as we can. ... Congress cannot leave town and on their way out of town wave to the American people and say, 'We just raised your taxes $1,000.'"

"I do think making sure that the public understands that Congress ought to do something before they leave town, I think we can zero in some attention on that," the official added.

With the payroll tax cut set to expire at the end of 2011, the White House is increasingly looking to the lead-up to the year-end holiday recess as the make-or-break moment for the policy's future. While the Senate's adjournment date is not yet determined, the House of Representatives is eyeing a Dec. 8 end to the legislative calendar. Both adjournments will likely be pushed back as lawmakers weigh a host of other legislative matters before heading back to their districts.

"I find it hard to believe that these members of Congress are going to go to National Airport on December 23 and go home, and basically tell their constituents your taxes are going up $1,000 next year and we didn't do anything to help the economy," said one administration official.

The simpler legislative route for the White House may be to make a big push on the payroll tax cut prior to the Thanksgiving break. In previous briefings, administration officials have argued as much. On Nov. 23, the deficit-reduction super committee is supposed to offer its set of recommendations. The president and his staff have made little secret of their desire to see the super committee tuck the payroll tax cut extension (along with other elements of the president's jobs package) into that proposal. Democratic aides on Capitol Hill have largely agreed.

But there remain obstacles. Texas Sen. John Cornyn, a member of the Republican leadership, has said he opposes extending the payroll tax cut on the grounds that it's undermining the solvency of Social Security's trust fund. Other GOP lawmakers have objected to Democratic efforts to put a surtax on millionaires as a means of offsetting the extension, which is projected to cost $145 billion. Still others have argued that, rather than extending the tax cut for an additional year or so, the White House and Congress should work to make it permanent.

Asked about the latter argument, a senior administration official said any discussion of making the tax cut permanent would likely have to take place in the context of negotiations on broader tax reform. And with the Bush-era income tax cuts set to expire at the end of 2012, those talks are about a year away.

As for the offset for the payroll tax cut, the senior officials were pressed by reporters as to why there needed to be an offset at all. The payroll tax cut was originally passed without corresponding revenue savings elsewhere. Although deficit reduction hysteria has since taken over Capitol Hill, there is some economic merit (it would prove more stimulative to the economy) to doing that again.

"It is too early to begin to speculate about [dropping the millionaire's surtax]," the official said. "But I will say that every element of our jobs bill can be paid for."