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Tentative Deal Reached to Preserve Cut in Payroll Tax

Members of a House-Senate committee charged with writing a measure to extend a payroll tax reduction and provide added unemployment benefits reached a tentative agreement Tuesday evening, with Republicans and Democrats claiming a degree of political victory in a fight with significant election-year implications.

Uncle Sam and money
Uncle Sam and money

One day after House Republican leaders said they would offer a bill to extend the $100 billion payroll tax rollback for millions of working Americans without requiring spending cuts to pay for it, the Congressional negotiators struck a broader deal that would also extend unemployment benefitsand prevent a large cut in reimbursements to doctors who accept Medicare .

A vote on the measure would most likely happen by Friday, when Congress is set to recess for a week. But senior aides warned that negotiators still had to sign off formally on the agreement and that obstacles could surface given the long-running tensions over the measure.

Democrats, elated after winning the Republican tax concession after months of clashes, said they had also been able to beat back new conditions that Republicans had wanted on jobless pay, like requiring beneficiaries to seek high school equivalency degrees, and had found middle ground on Republican attempts to significantly reduce the number of weeks in which the unemployed could draw benefits.

Republicans did make Democrats pay for the added unemployment benefits through changes to federal pensions, aides said. More important, Republican leaders and their advisers said that they had removed an election-year hammer from the hands of President Obama and Congressional Democrats, depriving them of the ability to keep pounding on the idea that Republicans were resistant to tax cuts for the middle class.

The deal also appeared to solidify Speaker John A. Boehner’s shift in leadership strategy, signaled at the end of the last year when he forced a short-term payroll tax extension on his fractious rank and file. The agreement on Tuesday suggested that he would spend the balance of the year doing what he thought was best for his party and its chances of holding on to the House, and less time fretting over whether the most conservative corner of his members were with him. In fact, the plan emerging from the negotiating committee could require the acquiescence of House Democrats to secure the 218 votes it needs for passage.

The tentative accord emerged after Mr. Obama earlier on Tuesday welcomed signs of progress in extending a payroll tax cut but urged Americans to continue to press their representatives to approve the tax break quickly, before it expires at the end of the month.

“As you guys know, you can’t take anything for granted here in Washington — until my signature is actually on it,” the president said in an appearance in the Eisenhower Executive Office Building next to the White House. He was apparently referring to last December, when Senate Republicans initially agreed to a two-month payroll extension only to have House Republicans balk. The president ended up winning that fight after House Republicans buckled under political pressure and an onslaught of calls and e-mails from constituents.

Republicans said that the House leadership decided to capitulate on paying for the tax cut because it appeared that Democrats were going to hold out in the talks and blame Republicans for the impasse if there were no resolution.

“I can understand why the House leadership, exasperated with the lack of progress in the conference, is looking around at other alternatives,” Senator Mitch McConnell of Kentucky, the Republican leader, told reporters on Tuesday.

While many rank-and-file members said they needed more time to study the agreement, and leaders in both parties preferred to stay mum until they were ready to make formal announcements, Democrats were privately crowing Tuesday night that the deal reflected far more of their priorities than those of their counterparts. Republicans, acknowledging that there were few substantive policy victories to claim, said they believed that it was worth it to avoid a protracted fight over benefits that together touch the lives of nearly every American.

“Leadership clearly has a positive desire to put this behind us,” said Representative Bill Huizenga, Republican of Michigan, who left a meeting of House Republicans looking grim, “and are not as open to listening to the rest of the conference to find out what the conference thinks.”

But he, like some other Republicans, seemed resigned to approval of the agreement. “We’re going to get an extension of the middle-class tax cut,” said Representative Michael G. Fitzpatrick of Pennsylvania, shrugging slightly. It was also clear that there were many members who would not support the measure. “I know enough to know I’m not voting for it,” said Representative Jason Chaffetz of Utah.

The highest priority for Democrats beside the payroll tax cut was to have a significant extension of unemployment benefits. Republicans wanted to move down from the maximum of 99 weeks to 59 weeks, while Senate Democrats proposed 93 weeks. In the tentative deal, the maximum number of weeks would be 73, a level that would be largely reserved for states with high unemployment . That extension will be paid for with the pension change for federal workers coupled with the sale of radio spectrum licenses and other smaller producers of revenue.

The piece of the deal that would protect doctors from a huge cut in Medicare reimbursement fees would do so through cuts in the new prevention and public health fund established in the health care law, combined with reducing help for hospitals with bad debt and other health-care-related spending trims.

The agreement was almost totally brokered by the two top tax writers in Congress, Senator Max Baucus, Democrat of Montana, and Representative Dave Camp, Republican of Michigan.

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