House Rejects Senate Bill to Extend Payroll-Tax Cut

An extension of the payroll-tax cut was in serious jeopardy Tuesday as both the House and Senate refused to negotiate a compromise on the measure that affects 160 million Americans.

The House rejected the version of the bi-partisan two-month payroll tax cut extension that was approved by a majority of the Senate.
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The House rejected the version of the bi-partisan two-month payroll tax cut extension that was approved by a majority of the Senate.

Earlier in the day, the Republican-led House rejected the Senate bill, which is backed by President Obama, to extend the payroll tax cut for two months after it expires at the end of this year. The House is demanding a year-long extension, but that would require the Senate to return from its Christmas recess.

After the House vote, Senate Majority Leader Harry Reid told reporters that the Senate, which left town on Saturday, would not be returning to Capitol Hill. Reid repeated his demand that the House first pass the Senate's two-month extension before there are any negotiations.

President Obama, meanwhile, called the Senate bill the "only viable option" and urged the House to "put politics aside and give the American people the assurance they need."

Obama also reiterated his stance that if Congress fails to pass the tax-cut bill, the lawmakers will be endangering the U.S. recovery.

"The clock is ticking," Obama said. "Time is running out."

House Leader Boehner, in a near-immediate rebuttle, threw the responsibility of passing the bill back to the president and Senate.

"Now it's up to the president to show real leadership," Boehner said. "President Obama needs to call on Senate Democrats to resolve this bill as soon as possible. We've done our work for the American people."

Boehner added: "Our negotiators are here, and ready to work. Our aim is to give the president just what he asked for."

Without a bill extending the cuts, payroll taxes will go up for 160 million workers on Jan. 1. Almost two million people could lose unemploymentbenefits as well.

Both sides insist they want to extend the provisions before a Dec. 31 deadline, but that is proving difficult. After overwhelmingly passing a two-month extension Saturday, senators raced for the exits in the belief that the House would see no alternative but to go along. The Senate isn't scheduled to resume legislative work until Jan. 23.

The Senate's short-term approach would have renew a two-percentage-point cut in the Social Security payroll tax, plus jobless benefits for the long-term unemployed, and would prevent a huge cut in Medicare payments to doctors.

Driving the House Republicans' frustration at the Senate measure is that it drops changes to the unemployment insurance system pressed by conservatives, along with cuts to Obama's health-care law.

"With millions of Americans struggling to make ends meet, it would be unconscionable for Speaker (John) Boehner to block a bipartisan agreement that would protect middle-class families from the thousand-dollar tax increase looming on January 1st," said Senate Majority Leader Harry Reid, D-Nev., who negotiated the two-month extension with Senate GOP leader Mitch McConnell of Kentucky. The two-percentage-point tax cut provides about a $1,000 annual tax cut for a typical earner making about $50,000 a year.

Both sides tried to position themselves as the strongest advocates of the payroll tax cut, with House Republicans accusing the Senate of lollygagging on vacation and Senate Democrats countering that the House was seeking a partisan battle rather than taking the obvious route of approving the stopgap bill to buy more time for negotiations.

Just a couple of weeks after many Republicans made it plain they thought that the payroll tax cut — the centerpiece of Obama's autumn jobs agenda — hadn't worked and that renewing it was a waste of money, Republicans emerged from a closed-door meeting touting their support for it.

"Do you want to do something for 60 days that kicks the can down the road?" said Rep. Jeb Hensarling, R-Texas. "Or do you want to do what the president asked us to do? And we're people who don't agree with the president all that often."

"I've never seen us so unified," Rep. Louie Gohmert, R-Texas, said as he left a two-hour, closed-door meeting Monday night where Republicans firmed up their plans. He said the payroll tax cut that has been in effect this year failed to create any jobs, but he favored extending it for another 12 months because "it's tough to raise taxes when you're in a down economy."

Congress' approval ratings are in the cellar, in part because of repeated partisan confrontations that brought the Treasury to the brink of a first-ever default last summer, and more than once pushed the vast federal establishment to the edge of a partial shutdown.

Before the House vote, Republican divisions were prominently on display.

The two-month measure that cleared the Senate, 89-10, on Saturday had the full support of McConnell, the Republican leader, who also told reporters he was optimistic the House would sign on. Senate negotiators had tried to agree on a compromise to cover a full year, but were unable to come up with enough savings to offset the cost and prevent deficits from rising.

The two-month extension was a fallback, and officials say that when McConnell personally informed Boehner and House Majority Leader Eric Cantor of the deal at a private meeting, they said they would check with their rank and file.

But on Tuesday, House conservatives made clear that they were unhappy with the measure.

Ironically, until the House rank and file revolted, it appeared that Republicans had outmaneuvered Democrats and Obama on one point.

The two-month measure that cleared the Senate required the president to decide within 60 days to allow construction on a proposed oil pipeline that promises thousands of construction jobs. Obama had threatened to veto legislation that included the requirement, then did an about-face.

The president recently announced he was delaying a decision on the pipeline until after the 2012 elections, meaning that while seeking a new term, he would not have to choose between disappointing environmentalists who oppose the project and blue-collar unions that support it.

Reuters contributed to this report.