Senate Majority Leader Harry Reid will introduce "compromise" legislation to extend the payroll tax holiday on Monday, the chairman of the Senate Budget Committee said Sunday in an announcement that surprised some Republicans.
"Majority Leader Reid called me yesterday and said he will propose tomorrow a compromise plan to extend the payroll tax cut," Sen. Kent Conrad, D-N.D., told "Fox News Sunday."
Conrad said he doesn't want to preempt the announcement, but expects Reid to offer a plan that will be paid for -- a bone of contention for some in Washington who say the extension will take more than $120 billion from Social Security without a revenue stream to replenish the account.
"It will be paid for. It will be paid for in a way that's credible and serious. It will be able to represent a compromise from what was voted on last week. And then it's a serious attempt to move this ball forward because we should not have a tax increase on the middle class. That makes no sense in this economy, Conrad said.
The payroll tax cut is one of President Obama's key issues as the economy continues to simmer on a low heat. It would increase the 2011 cut from 2 percentage points off the 6.2 percent that Americans pay into Social Security to 3.1 percent. The cut, first enacted this year, saved middle-class Americans about $1,000 a year, and would leave $1,500 in people's pockets in 2012.
But Democrats had proposed paying for it with a tax increase on the wealthy. Republicans called for freezing federal workers' pay and reducing government bureaucracy to pay for the cut. On Thursday, both the Republican and a Democratic plan failed to get to the 60-vote threshold needed to pass the Senate.
White House Economic Council Director Gene Sperling said Sunday Obama supports a compromise.
"We are always willing to work together, so I'm not going to say the president is going to insist on one and only one way to work on this," Sperling told CSPAN's "Newsmakers"
Conrad's announcement surprised one senior Republican leadership aide, who questioned the bipartisan nature of the plan.
"Helluva 'compromise' if nobody’s heard about it -- or negotiated it," the aide told Fox News.
And Rep. Michele Bachmann, R-Minn., a Republican presidential candidate, told "Fox News Sunday" that she would not support any extension.
"The Social Security trust fund, when they run out of money, they have to go to the general fund to get the money to pay for Social Security checks. Well, we are broke. There is no money in the general trust fund and so we have to borrow more money from China. Why would we do this?" she said.
Despite allegations that the payroll tax holiday and unemployment benefit extensions will expire at year's end, Sen. Tom Coburn, R-Okla., said he expects both to be extended by Congress. But, he said, it should come with cuts elsewhere.
"The question the American people ought to ask is: where is the backbone in Washington to actually pay for these extensions in the year in which the money is spent?" said Coburn, who appeared with Conrad. "We are playing games. We're like the guy in the fair with the pea under the walnut, we are playing the game with the American people. Nobody has cut anything yet in Washington."
Coburn and Conrad, both members of the president's deficit reduction commission that a year ago offered a plan to reduce the deficit by $4 trillion over 10 years, agreed that Congress needs to return to that framework.
The Bowles-Simpson plan -- named after commission co-chairs Erskine Bowles and Alan Simpson -- called for eliminating tax deductions to lower overall tax rates, raising the retirement age and reducing benefits for Social Security and reform Medicare. It never made it to a vote on Capitol Hill because the plan did not get the requisite 14 out of 18 commission members needed to advance the package.
"Eleven of 18 -- five Democrats, five Republicans, one independent -- we agreed to this plan. That is 60 percent. Even in Washington, 60 percent should pass a plan," Conrad said. "We have 150 members of the House and Senate who will join together to say let's move forward with a Bowles-Simpson-like approach. And we've got the opportunity to do something critical important for the country. Let's do it."
Coburn said he agrees the format created by the commission could be a winner on the Hill if enough lawmakers are willing to take a difficult vote.