President Obama signed legislation Friday extending a payroll tax cut for two months, concluding an end-of-year drama that split Republicans and threatened a tax hike on 160 million Americans.
Obama acted after the House and Senate approved the tax cut extension, which will maintain the Social Security tax at 4.2 percent. The legislation also extends unemployment insurance for jobless workers and forces Obama to make a decision within 60 days on whether to permit construction of an oil pipeline opposed by environmental groups.
By signing the bill, Obama capped nearly a week-long standoff with House Republicans who demanded a full-year extension. Under a deal reached Thursday, House and Senate leaders named negotiators to begin working on a longer-term bill.
During Friday's press conference, the President emphasized his commitment to extending the now 2-month tax cut into a longer-term bill.
“I still believe a full-year agreement should be a formality.”
Congressional passage of the bill Friday put off until January a fight over how to pay for the 2 percentage point tax cut, extend jobless benefits averaging around $300 a week and prevent doctors from absorbing a big cut in Medicare payments through 2012.
Those goals had been embraced by virtually every lawmaker in the House and Senate, but had been derailed in a quarrel over demands by House Republicans for immediate negotiations on a long-term extension bill.
Senate leaders of both parties had tried to barter such an agreement among themselves a week ago but failed, instead agreeing upon a 60-day measure to buy time for talks next year.
The decision by House Speaker John Boehner, R-Ohio, to cave in to the Senate came after days of criticism from Obama and Democrats.
But perhaps more tellingly, GOP stalwarts like strategist Karl Rove and the Wall St. Journal editorial board warned that if the tax cuts were allowed to expire, Republicans would take a political beating that would harm efforts to unseat Obama next year.
Friday's House and Senate sessions are remarkable. Both chambers have recessed for the holidays but leaders in both parties passed the short-term agreement under debate rules that would have allowed any individual member of Congress to derail the pact, at least for a time.
The developments were a clear win for Obama. The payroll tax cut was the centerpiece of his three-month, campaign-style drive for jobs legislation that seems to have contributed to an uptick in his poll numbers — and took a toll on those of congressional Republicans.
Obama, Republicans and congressional Democrats all said they preferred a one-year extension but the politics of achieving the goal, particularly the spending cuts and new fees required to pay for it, eluded them. All pledged to start working on that in January.
"There remain important differences between the parties on how to implement these policies, and it is critical that we protect middle-class families from a tax increase while we work them out," Senate Majority Leader Harry Reid, D-Nev., said.
House GOP arguments about the legislative process and what the "uncertainty" of a two-month extension would mean for businesses were unpersuasive, and Obama was clearly on the offensive.
"Has this place become so dysfunctional that even when we agree to things, we can't do it?" Obama said. "Enough is enough."
The top Senate Republican, Mitch McConnell of Kentucky, was a driving force behind Thursday's agreement, imploring Boehner to accept the deal that McConnell and Reid had struck last week and passed with overwhelming support in both parties.
Meanwhile, tea party-backed House Republicans began to abandon their leadership.
"I don't think that my constituents should have a tax increase because of Washington's dysfunction," freshman Rep. Sean Duffy, R-Wis., said.
If the cuts had expired as scheduled, 160 million workers would have seen a tax increase of $20 a week for an average worker earning about $50,000 a year. And up to 2 million people without jobs for six months would start losing unemployment benefits averaging $300 a week. Doctors would have seen a 27 percent cut in their Medicare payments, the product of an archaic 1997 cut that Congress has been unable to fix.
Almost forgotten in the firestorm is that House GOP leaders extracted a major victory last week — winning a provision that requires Obama to make a swift decision on whether to approve construction of the Keystone XL oil pipeline, which would bring Canadian oil to the U.S. and create thousands of construction jobs.
To block the pipeline, Obama would have to declare that is not in the nation's interest.
Obama had wanted to put the decision off until after the 2012 election.
House Republicans won additional concessions: that Senate Democrats would name negotiators on the one-year House measure, with a provision to ease concerns that the 60-day extension would be hard for payroll processing companies to implement.