U.S. Senate Democrats plan to offer a new proposal Monday to extend a popular payroll tax cut amid signals that Republican leaders would accept a compromise that covers the cost to the federal Treasury.
Senate Budget Committee Chairman Kent Conrad, a Democrat, said that the offer would be a "serious attempt to move this ball forward," and avoid a Dec. 31 expiration of the popular tax cut.
The proposal will be put forward by Senate Majority Leader Harry Reid, a Democrat, on Monday, Conrad told the "Fox News Sunday" program. He declined to give details.
Conrad called Reid's proposal "a compromise," but a spokesman for Senate Republican Leader Mitch McConnell said Republicans were not consulted.
President Barack Obama and other Democrats want to expand and continue the payroll tax break for workers and extend it to employers, arguing it would help stimulate the sluggish U.S. economy. They have offered to cover the plan's cost with a new tax on millionaires.
Republicans instead offered to extend the tax break, which reduces the Social Security tax to 4.2 percent from 6.2 percent, and cover its roughly $110 billion cost largely by continuing a federal workers' pay freeze through 2015 and gradually reducing the federal workforce by 10 percent.
The competing plans were defeated on Thursday in the Democratic-controlled Senate.
While declining to discuss details, Conrad said the cost of Reid's proposal would be fully covered and not increase the nation's record $15 trillion debt.
"It will be paid for, it will be in a way that is credible and serious," Conrad said.
Many Republican lawmakers are skeptical that extending the tax cut beyond this year will spur job creation, and they say it will have only a temporary effect on the economy.
Some also argue an extension would take money out of the government-run Social Security retirement program, which is under increasing financial strain.
Democrats contend that revenue from the federal government's general fund — money not earmarked for specific programs or activities — will be used to make up for any loss of funds intended for the Social Security program.
Fearing a possible backlash from voters in the 2012 elections, most Republicans want to at least extend the current tax break. Republican leaders announced last week a willingness to compromise with Democrats on the issue.
Obama has pushed for extending the payroll tax cut as well jobless benefits for the long-term unemployed in campaign-style trips around the nation. The nation's unemployment rate is currently 8.6 percent.
"Probably they both (payroll tax break and unemployment insurance) will be extended," Republican Senator Tom Coburn said on "Fox News Sunday."
The White House, investment banks and some economists have warned that U.S. economic growth could suffer in 2012 if the tax cut for workers is allowed to expire.
House Speaker John Boehner put himself at odds with some members of his fellow Republicans who are skeptical of its benefits last week when he agreed that extending the tax break would help the economy.
Republican House leaders have not offered a counterproposal, but an aide said the chamber could consider its version of the payroll tax extension as early as this week.
© 2013 Thomson/Reuters. All rights reserved.