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Payroll tax vote exposes divisions within each party

Despite the bipartisan support for the payroll tax bill, blocks in both parties had reservations: Republicans angry that the measure was not paid for, and Democrats worried about the health of Social Security.

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• Lowering the scope of federal jobless benefits to 73 weeks, down from a maximum of 99 weeks, to be paid for in part by requiring new federal hires to pay more into their pensions.

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• New requirements for workers seeking unemployment benefits, including a measure that allows states to require drug tests of recipients who have lost a job because they failed or refused a drug test.

Republicans had also urged requiring that all recipients who have yet to graduate from high school be required to seek alternative certification, but Democrats blocked that measure as adding an unnecessary burden to jobless workers.

While supporting extending these provisions, many GOP senators objected to being excluded from negotiations that involved mainly majority House Republicans and Senate Democrats. On Friday, 30 Senate Republicans voted against the bill, nearly derailing the measure.

Some Democrats also opposed the final deal on principle, because it weakened Social Security, an iconic program for Democrats, or because it tapped newly hired federal workers to offset the costs of extending unemployment insurance. Maryland Sens. Barbara Mikulski (D) and Benjamin Cardin (D), representing thousands of federal workers, broke with leadership to oppose the bill over this issue.

The Obama administration has twice tapped payroll tax breaks as a stimulus to jumpstart the economy. In March 2010, Congress approved a temporary payroll tax exemption for employers who hired a jobless worker. In December 2010, Congress passed a one-year payroll tax holiday for employees.

Sen. Tom Harkin (D) of Iowa, in a floor speech on the eve of Friday’s vote, dubbed this move “the beginning of the end of the sanctity of Social Security,” because it disrupted a dedicated funding stream for Social Security.

Many of the naysayers on this bill, on both sides of the aisle, objected to adding $100 billion to the federal deficit, already projected to exceed $1 trillion.

“Bipartisan agreement on the payroll tax holiday is welcome news for workers and the still struggling economy,” said Steve Bell, senior director of the Bipartisan Policy Center’s Economic Policy Project.

“However, failure to offset the costs of the tax extension will raise future deficits and move us closer to a potential breach of the $16.4 trillion debt limit,” he added, in a statement.

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