House GOP Leaders Agree to Payroll Tax Cut Extension

House Republican leaders, after months of bitter fighting, are poised on Friday to pass a payroll tax cut extension that President Obama argues is vital to the health of the economy.

President Barack Obama delivers remarks on the impasse in Congress over the payroll tax cut extension during a statement in the South Court Auditorium of the Eisenhower Executive Office Building, Dec. 22, 2011. Photo: Pete Souza/Official White House Photo

Ending a dramatic, weeks-long political standoff, House Republican leaders agreed Thursday to pass a Senate-endorsed short-term extension of the payroll tax cut in return for House-Senate negotiations on a year-long package.

Under a deal reached between House and Senate leaders, the House will now approve as early as Friday the two-month extension of a payroll tax holiday and unemployment benefits approved by the Senate last Saturday.

The Senate will also appoint members of a House-Senate conference committee to negotiate legislation to extend both benefits through 2012.

President Barack Obama, who has been pounding House Republicans all week for preventing the Senate-passed bill from going through, hailed the news of a deal:

“Today, I congratulate members of Congress for ending the partisan stalemate by reaching an agreement that meets that test,” Obama said in a statement.

“This is good news, just in time for the holidays. This is the right thing to do to strengthen our families, grow our economy, and create new jobs. This is real money that will make a real difference in people’s lives.”

House Republicans — who rejected an almost identical deal on Tuesday — collapsed under the political rubble that has accumulated over the week, much of it from their own party, worried that the blockade would do serious damage to their appeal to voters.

Boehner acknowledged the opposition that he faced in initially opposing the measure. “It may not have been politically the smartest thing in the world,” Boehner told reporters late on Thursday. But he said his fellow House Republicans “waged a good fight.”

Boehner held a conference call with members on Thursday evening to lay out the agreement. The call lasted about 10 minutes, according to aides, and Boehner took no questions. Shortly after, he held a press conference to announce the plan moving forward.

“Senator Reid and I have reached an agreement that will ensure taxes do not increase for working families on Jan. 1 while ensuring that a complex new reporting burden is not unintentionally imposed on small business job creators,” Boehner said.

“We will ask the House and Senate to approve this agreement by unanimous consent before Christmas. I thank our members — particularly those who have remained here in the Capitol with the holidays approaching — for their efforts to enact a full-year extension of the payroll tax cut for working families.”

Under the deal, the employee’s share of the Social Security payroll tax will stay at the current level, 4.2 percent of wages, through Feb. 29. In the absence of Congressional action, it would revert to the usual 6.2 percent next month.

The government will also continue paying unemployment insurance benefits under current policy through February. Without Congressional action, many of the long-term unemployed would begin losing benefits next month.

Last Saturday, the Senate approved the two-month extension in a strong, bipartisan vote. But House conservatives, challenging Boehner, said they would not go along. Instead, they pushed for a year-long extension, despite earlier opposition to any renewal of the payroll tax cut.

Their maneuvers led some Democrats to suspect that Republicans were simply trying to kill the measure.

House Republicans all week insisted on a 12-month payroll tax extension. But Democrats did not budge, arguing that the two-month compromise hammered out in the Senate must first be approved to ensure no lapse in the lower rate. Then, they said, negotiations could continue.

The push to find a quick resolution was touched off Thursday by Senator Mitch McConnell of Kentucky, the Republican leader, who had negotiated the two-month extension. After a few days of silence, he called on the House to accept a temporary continuation of the tax cut, and to extend unemployment pay, as long as Senate Democrats committed to quickly opening negotiations over a yearlong agreement.

“House Republicans sensibly want greater certainty about the duration of these provisions, while Senate Democrats want more time to negotiate the terms,” Mr. McConnell said in a prepared statement. “We can and should do both.”

While the final deal represents a fairly stunning defeat for House GOP leadership, on strict policy terms, the Republican Party was able to secure some major concessions.

Democrats initially wanted to impose a new tax on incomes above $1 million as a way to pay for the measure. That was scrapped. The president had also vowed to oppose any payroll tax extension that forced his administration to build the Keystone pipeline, a pending project that would carry crude oil from Canada through the United States.

The final bill doesn’t force construction, but it does require that a decision be made within 60 days. However, those victories became obscured by the fumbled effort by House Republican leadership to lock in even more concessions. Their efforts to hold out for a year-long bill were driven by a desire to attach even more spending cuts to a final package. [via Huffington Post, Reuters and The New York Times]

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