Analysis: Expect jobs deal 'yes' on tax cuts

[September 12, 2011]  WASHINGTON (AP) -- The real takeaway from President Barack Obama's jobs agenda?

Workers probably can count on continuing to pay lower Social Security taxes. Employers may not have to pay as much, either. The long-term unemployed probably will keep drawing jobless benefits. Congress can be expected to ratify new trade agreements with South Korea, Colombia and Panama.

But don't expect Congress to funnel tens of billions of dollars into rebuilding schools and blighted neighborhoods, or helping local governments pay teachers and firefighters, or setting up an "infrastructure bank" to leverage federal loans for roads, water systems and other public works projects.

"Enough of the stimulus," House Majority Leader Eric Cantor, R-Va., said Friday on CNBC. "We can't afford to keep spending money we don't have."

Republicans who control the House quickly dismissed anything smacking of "stimulus" in Obama's proposed American Jobs Act after his speech Thursday night. They embraced tax cuts for businesses, changes to unemployment insurance and promises to cut the red tape that delays construction projects.

They appear poised to accept, albeit grudgingly, extending this year's Social Security payroll tax cut for workers and including in it the Social Security taxes paid by employers, despite doubts in GOP ranks and among economists that the tax cut has done much to boost the economy.

"Republicans are not for increasing taxes," Cantor told reporters.

Last December, Congress passed a one-year cut in Social Security taxes, reducing the rate for workers from 6.2 percent to 4.2 percent for 2011. Employers still pay the 6.2 percent rate, which is applied to wages up to $106,800.

Obama proposes to extend the tax cut for a year and make it bigger, reducing the Social Security taxes paid by workers to 3.1 percent for 2012. He's also now proposing to extend the payroll tax cut to businesses on the first $5 million of their payroll. About 98 percent of companies have payrolls below the $5 million threshold, according to the White House.

Extending and enlarging the payroll tax cuts costs $240 billion.

Obama urged lawmakers to "pass this jobs plan right away." But he left the responsibility for paying for the $447 billion plan to a special bipartisan House-Senate panel created to reducing deficits by at least $1.2 trillion over the coming decade. The panel's top Republican wasn't happy about it.

"This proposal would make the already arduous challenge of finding bipartisan agreement on deficit reduction nearly impossible, removing our options for deficit reduction for a plan that won't reduce the deficit by one penny," said Rep. Jeb Hensarling, R-Texas. "It's not the role of this committee to spend more money we don't have on jobs we don't get."

The White House promises to send up soon a list of ideas on how to pay for it all.

Republicans also have qualms about the almost $50 billion cost of extending for one more year a jobless benefits program that allows up to 99 weeks of benefits for the long-term unemployed and covers about 5 million laid-off workers. But GOP leaders may go along with the idea after Obama embraced reforms, such as expanding to other states a Georgia program that uses unemployment funds for on-the-job training.

"I don't think they want a fight over that," said Jack Howard, a GOP lobbyist.

Republicans are enthusiastic about ratifying Obama-backed trade deals with South Korea, Colombia and Panama. They say the lowered trade barriers would help businesses and create jobs.

The pacts are snagged over renewing expanded aid and job training for workers who lost their jobs because of foreign competition. That aid is a core demand of Democrats who are unenthusiastic about the trade deals. While Republicans have promised to allow votes on the trade assistance, they haven't guaranteed it would pass.

Still, with both Obama and Republicans supporting the trade deals, they probably will win Senate and House ratification by year's end.

Cantor and other House Republicans also support initiatives aimed at small businesses. One would extend past its scheduled January expiration a tax break that allows companies to treat the cost of new equipment as a fully deductible business expense instead of an asset whose value declines with age.

They may be sympathetic to Obama's initiatives to award tax credits to companies that hire veterans or the long-term unemployed.

"We are always for lowering taxes, incentivizing the growth of business," said Rep. Marsha Blackburn, R-Tenn. "We're going to be looking for opportunities to cut taxes to stimulate the growth of small business and jobs creation."

Leaders and members of both parties returned to Washington last week after a monthlong recess with a sense that voters are fed up with the nonstop fighting in the capital. The conciliatory tone was noticeable from the start, and then typified by muted reactions to Obama's speech.

House Speaker John Boehner, R-Ohio, said Obama's proposals "merit consideration."

"We hope he gives serious consideration to our ideas as well," Boehner said. "It's my hope that we can work together."

But good intentions along don't enact laws. While the stagnant economy and restless voters are giving lawmakers lots of incentive to work together or risk voter wrath, there's no sword hanging over them if they don't act.

Last year's compromise on taxes and unemployment insurance, by contrast, was driven chiefly by the need to extend the Bush-era tax cuts that were scheduled to expire. That made the Republicans more flexible on extending jobless benefits after fighting Democrats for months over whether they should have been "paid for" with offsetting spending cuts.

[Associated Press; By ANDREW TAYLOR]

Andrew Taylor has covered Congress since 1990.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.