Obama prods GOP on payroll tax cut By DAVID ESPO

WASHINGTON (AP) — President Barack Obama accepted a move by Senate Democrats to scale back his Social Security payroll tax cut extension on Monday, then prodded Republicans to support it despite a requirement for the very wealthy to pay more taxes. Obama also called on lawmakers to renew a program of extended unemployment benefits due to expire on Dec. 31. He said the checks, which kick in after six months of joblessness, are "the last line of defense between hardship and catastrophe" for some victims of the recession and a painfully slow recovery. The president made his remarks at the White House as Republicans and Democrats in Congress said a holiday-season package was beginning to come into focus that could cost $180 billion or more over a decade. Elements include not only the payroll tax cut and unemployment benefit renewals, but also a provision to avert a threatened 27 percent reduction in fees to doctors who treat Medicare patients. While there are differences over the details of the three principal components — many Republicans are reluctant to extend the tax cut — there is at least as much disagreement among senior lawmakers in the two political parties over ways to cover the cost so deficits don't rise. House Republicans are drafting legislation to extend an existing pay freeze for federal workers as partial payment for the tax cut and unemployment benefits. Other cost-savers are expected to include a proposal Obama advanced earlier this year to raise pension costs for federal employees, officials said. The bill may also include another presidential recommendation, this one for a surcharge on Medigap policies purchased by future Medicare recipients. Officials said that to offset the two-year, $38 billion price tag of the Medicare provision, House Republicans want to cut funds from the year-old health care legislation that stands as Obama's signature domestic policy accomplishment. Some Democrats want instead to count defense funds approved but unspent for the wars in Iraq and Afghanistan — a proposal that many GOP lawmakers deem an accounting gimmick. The Medicare proposal enjoys strong popularity among lawmakers in both parties. House Republican leaders signaled last week they intend to include it in the overall package as a sweetener for members of the party's rank and file who are unhappy at the prospect of extending the payroll tax cut. GOP critics say there is no evidence that the current tax cut has helped create jobs, and also say they fear the impact of a renewal on the deficit and on the fund that pays Social Security benefits. A majority of Republican senators voted last week against a plan backed by their own leadership to extend the cut. But Obama noted House Speaker John Boehner, R-Ohio, has said that the renewal would help the economy, and said the party's Senate leaders had made similar comments. "I couldn't agree more. And I hope that the rest of their Republican colleagues come around and join Democrats to pass these tax cuts and put money back into the pockets of working Americans," the president said. Obama also added, "I know many Republicans have sworn an oath never to raise taxes as long as they live. How could it be that the only time there's a catch is when it comes to raising taxes on middle-class families? How can you fight tooth-and-nail to protect high-end tax breaks for the wealthiest Americans, and yet barely lift a finger to prevent taxes going up for 160 million Americans who really need the help?" He spoke as Senate Democrats unveiled revisions that cut the cost of the administration's proposal by one-third, to an estimated $179 billion. As rewritten, it deepens the current Social Security payroll tax cut and extends it until the end of 2012, but jettisons Obama's request to give businesses relief at the same time. Republicans were critical despite the changes. "Frankly, the only thing bipartisan about this latest political gambit is opposition to the permanent tax hike on small businesses to pay for temporary one-year tax policy," said Sen. Orrin Hatch, R- Utah, the senior Republican on the Senate Finance Committee. Republicans often refer to the proposal as a tax increase on small business owners in hopes of recasting Democratic claims that it would fall on "millionaires and billionaires." Advanced by Sen. Bob Casey, D-Pa., the revised proposal also scales back the surtax on seven-figure earners that Democrats had originally proposed to cover the bill's entire cost, from 3.25 percent to 1.9 percent. Also included are higher fees for consumers whose mortgages are from Fannie Mae and Freddie Mac, as well as a GOP proposal from last week to make sure millionaires don't receive unemployment benefits or food stamps.