Concerning congressional negotiations over the extension of the payroll tax cut, this Washington Post story seems to offer a prediction as to how this impasse will be broken (emphasis added):
To pay for extending the cut, Democrats have pushed for a surtax on those making more than $1 million a year. Although the Senate has twice blocked bills that would fund the reduction with a millionaire tax, [Senate Majority Leader Harry] Reid said again Tuesday that the wealthy should be asked to fund the tax cut for middle-class workers. He also said Democrats would be willing to extend the tax cut without outlining a way to pay for it.
And of course, House Republicans are perfectly willing to extend the payroll tax cut as long as the construction of that (”job creating”) oil pipeline can be sped up and avoid the usual environmental impact scrutiny, and as long as long-term unemployment benefits are made less long term (and the recipients subjected to drug testing). They would only partially pay for the payroll tax cut by cutting the pay and number of government workers.
It seems to me we’re headed for the typical “bipartisan compromise” agreement where the Republicans bully the Democrats, the Democrats call the Republicans bullies, and they ultimately all agree to just deficit-finance the whole thing, feeling good that the other side gave up their proposed offsets.
It wouldn’t be so bad (this payroll tax cut is supposed to be stimulus, after all) if it weren’t a scene played over and over again, not just for deficit-financed stimulus policy, but deficit-financed anything.