OVERNIGHT MONEY: Lawmakers inching closer to payroll tax cut deal

There are plenty of uncertain factors at play. 

Senate Republican Leader Mitch McConnell (Ky.) on Tuesday declined to endorse a proposal by House GOP leaders to extend the payroll tax holiday without paying for it.

{mosads}McConnell had told reporters last week that Congress should not extend the 4.2 percent payroll tax rate for the rest of the year by adding to the estimated $1.3 trillion federal deficit for 2012.

“I don’t have a view on it right now,” McConnell said Tuesday of the House proposal.

Meanwhile, Democrats — from President Obama to congressional leaders — are pressing Republicans to extend unemployment insurance and the Medicare reimbursement rate in tandem with the payroll tax cut. 

Sen. Charles Schumer (D-N.Y.) told reporters on Tuesday that the Republican shift was a “full-scale retreat,” and said Democrats would continue to press Republicans to extend emergency unemployment benefits and the Medicare “doc fix” along with the payroll tax cut. 

“We’re very glad that they gave in on the payroll tax cut,” Schumer said. “But they should not be under the illusion that they can figure now, job done. And we’re going to make sure they know that, and the American people know that.”

Another 10 months of the payroll tax cut would cost roughly $100 billion, and all three items are set to expire at the end of the month, unless Congress reaches a deal.

The two-percentage-point payroll tax cut is estimated to help roughly 160 million Americans, while doctors that treat Medicare patients would see their reimbursement rate cut 27 percent if lawmakers don’t act by the end of the month. 

Republicans got some support from their House Democratic colleagues, who said they will support the GOP’s stand-alone extension of the payroll tax holiday, Minority Leader Nancy Pelosi announced Tuesday.

“We have long proposed bringing this tax cut to the floor without pay-fors,” the California Democrat said, “and House Democrats will support it so that taxes are not raised on 160 million working Americans.”

Pelosi was quick to warn that the stand-alone payroll tax bill “should not be a substitute for the work of the conference committee,” which is trying to negotiate a bipartisan deal on the larger tax bill.

WHAT ELSE TO WATCH FOR 

Let’s talk manufacturing: President Obama heads to Wisconsin on Wednesday talk about the improving economy and highlight the importance of manufacturing in the economic recovery. He will visit padlock manufacturer Master Lock — it got a mention in his State of the Union address — because it’s a unionized company that recently brought back 100 workers from China.

Obama, who starts a three-day trip that takes him to California and Washington, will be met by embattled Wisconsin Gov. Scott Walker (R), who tried last year to end most collective bargaining rights for public employees in the state and is facing a recall. 

Obama, who called the move an “assault on unions” last year, will be accompanied by Walker.  

Xi visits Capitol Hill: Chinese Vice President Xi Jinping, who is expected to take over leadership of China next spring, heads up to Capitol Hill on Wednesday for meetings with House and Senate congressional leaders. Xi spent most of the day Tuesday meeting with top Obama administration officials, including President Obama and Vice President Biden. Xi had a full day of activities that included a trip to the Pentagon and a roundtable at the U.S. Chamber of Commerce for some of the top Chinese and U.S. business leaders. 

There are plenty of budget talks to go around: Capitol Hill will remain overrun with Obama administration officials on Wednesday to discuss the White House’s proposed fiscal 2013 budget plan. 

Transportation Secretary Ray LaHood heads to the Senate Budget Committee, where he could provide more details on President Obama’s infrastructure plan, while Health and Human Services Secretary Kathleen Sebelius talks with lawmakers on Senate Finance. Sebelius is expected to defend her agency’s $76.4 billion 2013 budget request. 

Republicans will have a field day asking her about the budget’s $864 million investment in the healthcare reform law’s health insurance exchanges; its 17 percent hike in the Food and Drug Administration budget, to $4.5 billion — almost half of which would come from new user fees; and its $364 billion in proposed cuts to Medicare and Medicaid.

Meanwhile, on the House side, acting director of the White House budget office Jeffrey Zients will get a grilling from the House Budget Committee. Republicans haven’t been kind to the president’s budget request, and GOP lawmakers will press Zients on deficit levels and new taxes included in the document, which was sent to Congress on Monday. 

On Tuesday, he came under heavy fire in the Senate as Republicans accused the White House of releasing a deceptive and damaging 2013 budget request.

The tense hearing featured a demand by ranking member Jeff Sessions (R-Ala.) that Zients consider resigning. Senate Budget Committee Chairman Kent Conrad (D-N.D.) cut Sessions off at one point with loud bangs of the gavel.

Defense Secretary Leon Panetta, who defended proposed cuts to the military Tuesday and reminded lawmakers that the $487 billion reduction in Pentagon spending is their own handiwork, will talk FY2013 Defense Authorization at the House Armed Services Committee. 

Homeland Security Secretary Janet Napolitano will make appearances at the House Appropriations subcommittee on Homeland Security as well as at the House Homeland Security Committee in the afternoon. 

Interior Secretary Ken Salazar testifies before the House Natural Resources Committee.

Geithner, Part Deux: Treasury Secretary Timothy Geithner will be back on the Hill tomorrow to chat about the president’s 2013 budget proposal, this time before the House Ways and Means Committee. Geithner began Tuesday by paying a visit to the Senate Finance Committee, where he had to defend the $3.8 trillion package from GOP attacks that it was too expensive and the wrong prescription for the nation. Expect him to do the same tomorrow, making the case that the combination of tax increases, spending cuts and economic stimulus is just what the doctor ordered for the economy and America’s fiscal future.

Recess reax: President Obama’s recess appointments will once again be under the congressional spotlight tomorrow with a pair of hearings. At the House Judiciary Committee, Republicans will be chatting about the president’s “unprecedented” grab for executive power by forcing through a quartet of recess appointments, including Richard Cordray to be director of the Consumer Financial Protection Bureau (CFPB). And a House Financial Services subcommittee will welcome Cordray himself for another trip up to the Hill to defend his agency’s budget from probing GOP lawmakers. Republicans have long bristled over the fact that Congress does not control the agency’s budget, but rather gets its funds from the Federal Reserve, and are pushing legislation to let appropriations set the size of the coffers. Cordray and CFPB backers have defended the arrangement, pointing out that other banking regulators enjoy similar budgetary independence.

Pay check: A Senate Banking subcommittee will be talking tomorrow about how Wall Street’s compensation practices could best be used to encourage economic productivity and not the pursuit of short-term, risky gains. On hand will be Christy Romero, the acting special inspector general for the government’s Troubled Asset Relief Program.

Wait just a minute: Those of you dying for more detail on the latest meeting of the Federal Reserve’s policy-setting team are in luck — the minutes from the Jan. 24-25 meeting of the Federal Open Market Committee will be released tomorrow. Those minutes should flesh out the thinking behind the Fed’s decision to extend its plans to keep interest rates near zero until the end of 2014, 18 months longer than previously stated. It should also further detail the Fed’s thinking about the future of the economy as the recovery seems to be gaining steam.

BREAKING NEWS

Postal reform problems: A majority of the Senate Democratic Conference has taken issue with a postal service reform bill approved by the Senate Homeland Security Committee chaired by Sen. Joe Lieberman (I-Conn.).

Twenty-six Democratic senators and Independent Sen. Bernie Sanders (Vt.) voiced their objections in a letter to Lieberman and other members of the Homeland Security panel.

“The Lieberman bill as it now stands will end the postal service as we know it,” Sanders, who organized the letter-writing effort, said in an interview. “It will allow the postal service to shut down half the postal processing centers in this country. You’ll slow mail delivery service and you’ll enter into a death spiral where fewer and fewer customers will use the postal service. It lays the foundation for shutting down thousands of post offices.”

Sens. Tom Carper (D-Del.), Susan Collins (Maine), the panel’s senior Republican, and Scott Brown (R-Mass.) received copies of the missive.

ECONOMIC INDICATORS 

MBA Mortgage Index: The Mortgage Bankers Association releases its weekly report on mortgage application volume. 

Industrial Production-Capacity Utilization: The Federal Reserve will release its report showing the physical output of the nation’s factories, mines and utilities. The monthly report also provides a measure of capacity utilization. 

NAHB Housing Market Index: The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. 

WHAT YOU MIGHT HAVE MISSED

— Energy groups pressure White House on derivatives rules

— Panetta says cuts will not weaken military

— Toomey: ‘Decency’ calls on Reid to bring budget to Senate floor

— Obama cuts to heating assistance budget again provoke bipartisan opposition

— Obama signs $63B FAA funding bill into law

— Volcker joins comment frenzy over his financial rule

— Republicans look to require federal workers to pay more for retirement

— Small business index inches up ever so slightly

— Retail spending picks up in January

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