(Bloomberg News) Republicans in the U.S. Senate want to cover the cost of extending a payroll tax cut by freezing federal workers' pay through 2015 and reducing the federal civilian workforce by 10 percent, putting them at odds with Democrats over how to pay for the $119.6 billion tax break.

The proposal counters efforts by President Barack Obama and Democrats to expand the payroll tax cut and pay for it by imposing a 3.25 percent surtax on income above $1 million. Procedural votes on the competing proposals could occur in the Senate as early as today, and lawmakers don't expect either approach to advance because of continued differences between the parties.

"This is the same argument we've been having time after time, just in different contexts," Representative John Yarmuth, a Kentucky Democrat, said in an interview yesterday.

A 2 percentage point reduction in the payroll tax for employees expires Dec. 31. Obama has been urging Congress to extend it and expand it. He told an audience in Scranton, Pennsylvania, yesterday the U.S. economy would suffer a "massive blow" if Congress lets it expire.

"I want to make sure that we do this responsibly," he said. "So what I've said is to pay for this tax cut, we need to ask wealthy Americans to pay their fair share."

At a New York City fundraiser later in the day, Obama sounded a more conciliatory note as he referred to recent remarks by House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky.

Middle-Class Families

Obama said the Republican leaders "over the last couple of days" have indicated "that it probably does make sense not to have taxes go up for middle-class families, particularly since they've all taken an oath not to raise taxes." Obama said "additional progress in the next couple of weeks" may be possible.

Many Republican lawmakers have signed a no-tax-increase pledge promoted by activist Grover Norquist.

Republicans have resisted the Democrats' tax increases, and lawmakers said they weren't sure what proposal could win enough support to become law. Representative Tom Cole, an Oklahoma Republican, said members of his party were still trying to reach a consensus among themselves.