House GOP Agrees to Extend Payroll-Tax Cut for 2 Months

House Republican leaders abruptly caved and agreed to demands by President Barack Obama, congressional Democrats and fellow Republicans for a two-month extension of tax cuts for all workers.

Getty Images Speaker of the House John Boehner

The agreement, struck after some of the staunchest House conservatives began to retreat, also would renew jobless benefits for almost two million people and spare doctors from a big cut in Medicare payments.

The decision came after an intense day of maneuvering in which the Senate's top Republican leader, Kentuckian Mitch McConnell, urged the House to accept the Senate's short-term fix and negotiations later on a year-long extension. Obama, too, chided Republicans for blocking something all parties agreed upon.

Then a pair of GOP freshmen — the group most opposed to a short-term agreement — pivoted and urged a quick resolution before the tax cut expires Dec. 31. Absent a quick agreement, workers faced an increase of two percentage points in their Social Security taxes, or $1,000 a year for someone earning $50,000.

"I don't think that my constituents should have a tax increase because of Washington's dysfunction," said freshman Rep. Sean Duffy, R-Wis., a former reality show star.

"An `all or nothing' attitude is not what my constituents need now," Rep. Rick Crawford, R-Ark., wrote in a letter to House Speaker John Boehner. "We are now in a position...that requires Republicans to not only demand a willingness to compromise, but to offer it as well."

The rapid-fire developments underscored the political peril that House Republicans had courted after they rejected the two-month deal and insisted on dragging the Senate back into session to do it their way. The standoff rippled beyond Washington to Iowa, where Republican presidential candidates were making closing arguments less than two weeks before the caucuses that begin the nomination process.

Under the arrangement between Boehner and Senate Majority Leader Harry Reid, D-Nev., the House would pass a new bill mirroring the Senate measure — with modest tweaks to address concerns of payroll processors — in exchange for a guarantee that Reid would immediately name Senate negotiators on the House's separate, year-long measure.

Just hours earlier, Boehner had criticized the idea.

"A two-month extension only perpetuates the uncertainty that too many employers already have in dealing with the economy and what's coming out of Washington," Boehner told reporters.