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VOL. 126 | NO. 247 | Tuesday, December 20, 2011

House, Senate at Odds Over Payroll Tax Cut

ALAN FRAM | Associated Press

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WASHINGTON (AP) – The House and Senate barreled toward a collision Monday over some of the chief ingredients of President Barack Obama's recipe for reviving the economy, with tax increases and jobless benefit cuts awaiting millions of Americans on New Year's Day if the dispute is not resolved.

Senate Majority Leader Harry Reid said he won't renegotiate an extension of payroll tax cuts and unemployment coverage unless the House first approves a short-term bipartisan version the Senate has overwhelmingly approved. House Republicans strongly oppose that bill.

Earlier in the day, House Speaker John Boehner, R-Ohio, told reporters that he expects the House to reject the Senate bill Monday evening and then request talks.

"This is a question of whether the House of Representatives will be able to fulfill the basic legislative function of passing an overwhelmingly bipartisan agreement in order to protect the economic security of millions of middle-class Americans," Reid said in a written statement.

The Senate passed a two-month extension of the tax cut and unemployment benefits on Saturday with overwhelming support from senators of both parties and the backing of Obama. It had been negotiated by Senate Democratic and GOP leaders after they could not agree on how to pay for a more expensive, year-long measure.

After that vote, House Republicans told their leaders that they strongly opposed the Senate bill, complaining it lacked serious spending cuts and was too short. Boehner and other top House Republicans then said they opposed the Senate-approved bill.

Monday morning, Boehner told reporters that the House would reject the Senate-passed bill but said he didn't think it would be hard for the two sides to bridge their differences.

Unless Congress acts, 160 million workers on Jan. 1 will see a 2-percentage-point increase in the Social Security payroll tax that is deducted from their paychecks and benefits for millions of long-term unemployed people will start to expire.

"It's time to stop the nonsense. We can resolve these differences and we can do it in a way that provides certainty for job creators and others," Boehner said at a news conference, although he provided no estimate on how long it might take to produce a compromise.

House Majority Leader Eric Cantor, R-Va., said lawmakers would not let the tax increase kick in, but he did not say how they would resolve the dispute.

"We are going to stay here and do our work until we guarantee that no one faces a tax increase in the year ahead," Cantor said in a statement.

The leaders' comments came after a chaotic weekend in which Senate leaders first failed to agree on a full-year bill, then coalesced around the two-month-extension that passed overwhelmingly, only to spark a revolt among GOP conservatives in the House.

The revolt of the rank and file placed Boehner and Republicans in a difficult position, just as it appeared they had outmaneuvered Obama by assuring that the legislation would require him to make a swift decision on construction of a proposed oil pipeline.

Obama had announced he would put off the issue until after the presidential election in 2012 rather than decide the fate of a project that divided usual Democratic allies – environmentalists opposing and several labor unions supporting.

In a television interview shortly before Boehner's news conference, White House communications director Dan Pfeiffer accused Boehner of reversing his position on the two-month measure because of a "tea party revolt."

In his statement, Reid said he and Senate Minority Leader Mitch McConnell, R-Ky., had negotiated their compromise "at Speaker Boehner's request."

Boehner, R-Ohio, said he had not changed his view on the Senate bill.

"I raised concerns about the two-month process from the moment I heard about it," he said.

He called on members of the Senate to "put their vacations on hold" and return to forge a compromise.

Obama has said repeatedly that Congress should not quit for the year until the tax cut has been extended, and has said he would postpone a planned Hawaiian vacation until the bill is finished.

In an unusually harsh critique of his own party, moderate GOP Sen. Scott Brown of Massachusetts said House Republicans' opposition to the two-month extension was "irresponsible and wrong" because it threatened to result in tax increases and jobless benefit cuts.

"We cannot allow rigid partisan ideology and unwillingness to compromise stand in the way of working together," Brown said in a written statement.

The brinksmanship is a familiar pattern this year between the two parties, who have narrowly averted a federal default and several government shutdowns in past fights.

Extending the payroll tax cut and jobless benefits have been a keystone of Obama's and congressional Democrats' effort to spur a revival of the flaccid economy. Congressional Republican leaders also say they support the idea, but some of their rank-and-file remain reluctant to do so, saying the unemployment coverage is too generous and that cutting the payroll tax does not create jobs.

The Senate bill would cut the payroll tax, extend jobless benefits and avoid cuts in Medicare payments to doctors through February. Both sides say they want to renew all three for a full year, but bargainers have so far failed to agree on how to pay for a package that size, which could cost roughly $200 billion.

The White House's Pfeiffer said there was still an opportunity for House Republicans to avoid triggering a tax increase and for the chamber to pass the Senate-approved two-month extension.

"You only need a couple dozen Republicans to do it," Pfeiffer said. "I find it inconceivable that you can't get a couple dozen Republicans to vote for a tax cut for the middle class."

Boehner did not specify the changes he would like in the bill, but touted "reasonable reductions in spending" and language blocking some Obama administration anti-pollution rules in a yearlong payroll tax bill the House approved last week. That bill covered its costs by carving savings from federal workers, higher-income Medicare recipients, fees paid to insure mortgages and elsewhere.

McConnell offered support for Boehner Sunday. His spokesman, Donald Stewart, said the best way to "provide certainty for job creators, employees and the long-term unemployed is through regular order" – a term used to describe the normal process of negotiations between the House and Senate.

The Senate bill also includes a provision dear to Republicans that would force Obama to approve a proposed Canada-to-Texas oil pipeline within 60 days unless he declares the project would damage the national interest.

Obama had previously said he would make no decision on the Keystone XL pipeline until 2013, allowing him to wait until after next November's elections to choose between two Democratic constituencies: unions favoring the project's thousands of jobs and environmentalists opposed to its potential pollution and massive energy use. Obama initially threatened to kill the payroll tax bill if it included the pipeline language but eventually retreated.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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