Pablo Martinez Monsivais / AP
Senate Majority Whip Richard Durbin listens during a news conference about a compromise deal on the payroll tax cut, Thursday, Feb., 16, 2012, on Capitol Hill in Washington.
Updated at 2:58 pm ET - By a vote of 60 to 36, the Senate passed a bill Friday to keep the Social Security payroll tax at its lower 4.2 percent rate and to extend unemployment benefits.
Republican leaders were split on the measure, with GOP Leader Sen. Mitch McConnell of Kentucky voting for it, but GOP Whip Jon Kyl of Arizona voting against it.
Forty-six Democrats and 14 Republicans voted for the bill, while five Democrats and 31 Republicans voted against it.
The Congressional Budget Office said the bill would increase federal deficits by $89.3 billion over the next ten years.
Among the five Senate Democrats voting "no" was Sen. Tom Harkin of Iowa who objected to a $5 billion cut in a preventive care program which was part of the 2010 health care overhaul. House Republicans referred to the Harkin program as “an ObamaCare slush fund.” The cut was one of the provisions in the bill that helped to partially offset its cost.
The Senate vote came with no debate and only about 45 minutes after the House passed the bill by a vote of 293 to 132.
The support in the House was bipartisan, with 147 Democrats and 146 Republicans voting for the bill, while 41 Democrats and 91 Republicans opposed it.
Speaking at the Boeing plant in Everett, Wash., President Barack Obama celebrated the bill's passage, saying, "I'm going to sign this bill right away when I get back home," adding, "I want to thank members of Congress for listening to the voices of the American people."
Passage of the bill came after weeks of negotiations among congressional leaders over how, or if, the extensions would be paid for.
The payroll tax cut alone will cost $94.5 billion, according to the CBO.
A worker making $50,000 a year would pay $2,100 in Social Security taxes this year, instead of $3,100 if the tax were at its normal 6.2 percent level. The lost revenue for Social Security benefits will be replaced by drawing money out of general tax revenue, adding to the budget deficit.
The legislation will also continue payments to the unemployed for another ten months, but will limit them.
House Budget Committee Chairman Paul Ryan discusses the payroll tax cut extension and explains why he thinks it "won't do a lot."
By the end of the year, in states in which the unemployment rate is at or close to the national average of 8.3 percent, the bill reduces the maximum number of weeks of jobless benefits from 93 to 63. In states that had unemployment rates of 9 percent or higher, it reduces the maximum number of weeks of benefits from 93 to 73.
The unemployment benefits extension will cost $309 billion.
The bill also prevents a scheduled 27 percent cut in payments to doctors who treat Medicare patients, a provision which will cost $18 billion.
The bill achieves some of its savings to partially offset its costs by requiring new federal employees to pay more for their pension benefits. This part of the bill will raise $15 billion in revenues over ten years.
Most federal civilian employees make a contribution toward a defined benefit pension equal to 0.8 percent of their basic pay. The bill increases by 2.3 percent the employee pension contribution for federal employees entering service after this year.
On the House floor, Democratic Whip Steny Hoyer, whose Maryland district is home to many federal workers, angrily denounced the decision to pay for some of the cost of the bill by requiring federal workers to pay for more their pensions.
America, he said, needed “an energized, high-morale educated federal work force.” And he said “you will not have that, ladies and gentlemen, if we keep along this path of every time we come to bill that’s a little bit of trouble, the pay-for is to reach in the federal employees’ pockets.”
A CBO analysis released last month found that the federal government paid its workers 16 percent more in total compensation than it would have if compensation had been comparable with that in private sector firms.
The biggest difference is in benefits: “The cost of hourly benefits was 48 percent higher for federal civilian employees than for private-sector employees with certain similar observable characteristics,” the CBO said.