Lawmakers Near Deal on Payroll Tax Cut, Jobless Benefits

U.S. lawmakers were nearing a deal on Tuesday on legislation that would boost the economy in the short term by extending a payroll tax cut for 160 million workers and long-term jobless benefits for a full year, congressional aides said.

As Democratic and Republican negotiators worked on the final details of a broad agreement, President Barack Obama upped the pressure, telling lawmakers not to derail the economic recovery by allowing the measures to expire at the end of the month.

House Speaker John Boehner, the top Republican in Congress, and his lieutenants paved the way for a deal on Monday by backing down on the long-held Republican demand that the payroll tax cuts to be offset with spending cuts.

Boehner must still sell the concession, aimed at ensuring that Republicans do not get the blame for any tax hikes in an election year, to his often rebellious 242-strong caucus. He was due to meet them at 6 p.m. (2300 GMT).

Republicans have made deficit reduction their mantra as they paint Obama as a tax-and-spend liberal who has plunged the country deeper into debt. But Boehner's concession means the payroll tax cut will go unpaid for, adding $100 billion to the U.S. deficit.

Extending the year-old payroll tax cut would keep the current 4.2 percent payroll tax, down from 6.2 percent, until Dec. 31. Congress has until Feb. 29 to pass legislation renewing the tax cut, as well as government benefits for the long-term unemployed, for the rest of the year.

Negotiators were trying to reach a deal on spending cuts for unemployment benefits, possibly by reducing the maximum number of weeks the long-term jobless can claim for financial aid, to 79 weeks from the current 99, as Obama has proposed.

"Congress needs to extend that tax cut along with vital insurance lifelines for folks who have lost their jobs during this recession," Obama said at the White House. "And they need to do it now without drama and without delay."