(Reuters) - Lawmakers are trying to clinch a deal extending a popular payroll tax cut, working against a year-end deadline to avoid imposing an effective tax hike on 160 million Americans.
While Republican leaders agree with Democrats on the need to extend the tax cut, they disagree on how to fund the $120 billion cost.
Below are areas of contention and potential compromise.
The biggest bargaining chip for Republicans is their proposal to speed approval of TransCanada Corp’s Keystone XL pipeline project between the United States and Canada.
Republicans say the proposal will spur job growth and have been hammering the Democrats for President Barack Obama’s decision to delay a decision on the project, which is supported by a number of trade unions that typically back Democrats.
Senate Democratic leader Harry Reid has said the plan would be rejected by his chamber because of that provision, opposed by most Democrats.
Obama and Senate Democrats propose adding a nearly 2 percent surtax on millionaires to fund the payroll extension. The American public largely backs the idea, making this the Democrats’ best bargaining chip for a deal. Republicans nearly uniformly oppose this policy.
OBAMA‘S HEALTHCARE OVERHAUL
Republicans also have taken aim at the healthcare revamp championed by Democrats and Obama, and propose cutting tens of billions of dollars to defund the legislation requiring most Americans to have health insurance. The move will likely to face opposition from most Democrats.
Republicans want to cut the maximum amount of time for jobless benefits from 99 weeks to 59 weeks and impose other changes that Democrats say will hurt the most vulnerable in society as the U.S. grapples with high unemployment.
A potential deal could tweak the number of weeks covered and some other requirements for benefits.
Republicans want federal employees to pay a greater share of their pension obligations, to save $37 billion, and to extend a federal pay freeze for federal workers through 2013, a measure expected to raise $26 billion.
Obama had imposed a two-year pay freeze and the Republican proposal would extend that, but a number of influential Democrats representing federal workers will voice strong opposition to an extension.
Republicans want to boost fees paid by Fannie Mae and Freddie Mac, government-sponsored entities that are the biggest providers of U.S. mortgage financing. This would save the Treasury about $38 billion and is a possible area of compromise.
Republicans want to raise premiums for higher-income elderly recipients of the Medicare program to raise $31 billion. This group already pays higher premiums and the influential AARP elderly advocate group opposes the proposal.
That is likely to make Democrats wary of going along with the idea of compromise.
Republicans propose raising about $17 billion from auctioning off parts of the broadband spectrum owned by the U.S. government and to reallocate parts of it for public use. Democrats have agreed to some form of spectrum auctions, making this another possible area of compromise.
Republicans want to cut premium subsidies for certain properties that get federal flood insurance to save $4 billion. Democrats may be willing to agree to this.
Reporting By Kim Dixon and Donna Smith; editing by Christopher Wilson