Skip to main content

House GOP relents on payroll tax cut deal

By Alan Silverleib and Tom Cohen, CNN
updated 9:34 PM EST, Thu December 22, 2011
STORY HIGHLIGHTS
  • NEW: The House and the Senate are to take up the compromise Friday
  • Boehner says opposing the Senate's two-month plan was not politically smart
  • Obama urges Congress to negotiate a one-year extension when it returns
  • The payroll tax cut is set to expire December 31

Washington (CNN) -- A compromise measure to extend the payroll tax cut for two months comes before the House and Senate on Friday after Speaker John Boehner dropped his opposition under mounting pressure from the White House, congressional Democrats and fellow Republicans.

Both chambers will be asked to give unanimous consent, a procedural move that would allow the measure to pass even though most members will be home for the holidays.

If no one shows up to object in person, the plan originally worked out by the Senate and modified slightly Thursday to get the support of Boehner and House Republicans would go to President Barack Obama's desk.

Obama has promised to sign it, as well as a separate appropriations bill to fund the government through September 2012, before heading off to Hawaii to join his family for the holidays.

What the payroll tax deal would do

Deal extends tax cut for two months
Bachmann: Tax cuts 'temporary gimmick'

The agreement represented a symbolic triumph for the president, who pushed hard for extending the payroll tax cut as part of his jobs package and rallied public support for his stance.

While the two-month extension was shorter than desired, Obama urged congressional leaders to follow through on their stated intention to negotiate a one-year extension that all parties have said they favor.

"Today's victory is yours," Obama said in a tweet to followers Thursday night. "Keep making your voices heard -- it makes all the difference."

Under the deal, the payroll tax will remain at the current 4.2% rate instead of reverting to the 6.2% rate it was at before the cut enacted last year. Without congressional action, the higher rate would have returned in 2012, meaning an average $1,000 tax increase for 160 million Americans.

The agreement also includes the addition of legislative language to ease the administrative burden on small businesses implementing the plan, and a commitment to the negotiations on a one-year extension of the payroll tax cut as well as other benefits, according to statements by congressional leaders and Obama.

Boehner succumbed Thursday to calls from across the political spectrum for House Republicans to stop blocking congressional approval of the Senate-passed measure.

While minor changes were made to the Senate plan, Thursday's agreement produced essentially the same proposal as the one the Senate passed last Saturday in an 89-10 vote, with strong Republican support.

A House GOP uprising during a caucus conference call Saturday caused Boehner to reject the Senate plan, setting up this week's political showdown in the final days before the payroll tax rate was set to rise.

According to GOP sources, another conference call Thursday involved Boehner describing the terms of the agreement without allowing any members to ask questions or raise objections. One Republican House member on the call described Boehner as "tired and ticked off."

Boehner, R-Ohio, then announced the deal to reporters, calling the House GOP's prior opposition to the Senate plan the right thing to do, even if politically questionable.

"It may not have been politically the smartest thing in the world," Boehner said, but the end result was "we were able to fix what came out of the Senate."

The speaker also acknowledged the pressure he was under, saying: "I talked to enough members over the last 24 hours who say we don't like the two-month extension and if you can get this fixed, why not do the right thing for the American people even if it's not exactly what we want."

Analysts said Boehner had little choice but to back down.

"It became increasingly obvious he had to fold," said CNN Senior Political Analyst David Gergen, using poker terminology. Boehner was under "intense pressure from senior Republicans" over a situation that "became so botched," Gergen said.

Darrell West , the vice president and director of governance studies at the Brookings Institution, said the issue has worked in the favor of Democrats because they had Republicans "seemingly willing to accept a tax increase" by opposing the Senate extension of the payroll tax cut.

"Any time you can get the other party in opposition to its own stated principles, that's a good thing," West said.

The ongoing impasse pitting the House Republican leadership against the White House, congressional Democrats and fellow Republicans was the kind of political gamesmanship that Americans dislike about Congress, Obama said earlier Thursday.

The two-month Senate compromise was passed after Senate negotiators were unable to agree on a one-year extension.

But Boehner demanded negotiations on a one-year extension, arguing that anything shorter would simply prolong the issue and cause uncertainty for American taxpayers and businesses.

His stance drew sharp criticism this week, including an editorial in the conservative Wall Street Journal that said House Republicans had lost the political advantage of advocating tax cuts to Obama and the Democrats.

Gergen: Winds shift toward Obama

On Thursday, Senate Republican leader Mitch McConnell also called for Boehner to accept a short-term extension, and similar statements by other conservative Republicans showed the tide turning against Boehner and his GOP leaders.

Meanwhile, conservative Sen. Mike Johanns, R-Nebraska, and Rep. Sean Duffy, R-Wisconsin, added their voices to GOP calls for House Republicans to relent in their standoff.

"While I would prefer a year-long tax holiday, I refuse to let anyone play games with my constituents who stand to face a significant tax hike if we don't act," Duffy said in a statement. "That's why I will support any option to extend the payroll tax cut."

Obama, meanwhile, reiterated the Democratic position in a phone call with Boehner Thursday morning, stating that the House should pass the Senate's two-month extension and then negotiators should get to work on a longer-term deal.

The president also met with a group of middle-class Americans as part of a White House attempt to illustrate the impact on 160 million American workers if the tax holiday ends December 31. The typical worker's take home salary will shrink by about $40 per pay period without the tax cut.

"It's time for the House to listen ... to the voices all across the country and reconsider," Obama said. "I am ready to sign that (Senate) compromise into law the second it lands on my desk."

Obama blamed the impasse on "a faction of House Republicans" that refused to support the Senate compromise, even though leaders of both parties had insisted they wanted to extend the payroll tax cut.

He prompted laughter by adding: "Has this place become so dysfunctional that even when people agree to things we can't do it? It doesn't make any sense."

Senate Democratic leader Harry Reid of Nevada, reinforcing Obama's stance, released a statement promising that he will be "happy to restart the negotiating process to forge a year-long extension" as soon as the House passes the Senate's compromise plan.

Many in the GOP fear the issue damaged the party's anti-tax reputation heading into the 2012 campaign.

Pushed by his conservative, tea party-infused House GOP caucus, Boehner had continued to insist that anything short of an immediate 12-month extension of the tax holiday would only create more economic instability and do little to generate job growth.

Also at stake: extended emergency federal unemployment benefits and the so-called "doc fix," a delay in scheduled pay cuts to Medicare physicians.

Both of those measures, along with the tax holiday, were scheduled to expire in nine days.

All top Democrats and Republicans publicly agreed on the need for a one-year extension, but critics of the House GOP's stance insisted that the Senate's two-month extension was necessary to give negotiators more time to hammer out a deal over how to pay for the continuation.

They accused House Republicans of creating the very instability they had railed against, and of needlessly creating yet another congressional crisis at the end of a year filled with Capitol Hill showdowns.

Sen. John McCain of Arizona, the GOP's 2008 presidential nominee, strongly criticized the House GOP's stance on CNN's "American Morning" Thursday.

"The Republicans are losing this fight. We need to get back on track," McCain said. "A thousand dollars a year is a big amount of money to most Americans, and I think it's very important. ... I worry about the fact that we are continuing to increase the debt and the deficit, but now it's become very symbolic, and I think it has to be done."

The Wall Street Journal editorial, normally a conservative political platform, blasted Boehner and his House GOP colleagues, arguing that they had "achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter."

"At this stage, Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly," the paper's editorial writers said.

Numerous Senate Republicans have indicated they felt politically undercut by their House colleagues after agreeing to the two-month compromise negotiated by McConnell and Reid.

A number of Republicans have said the party should have declared victory after winning an agreement by Obama -- as part of the payroll tax cut package -- to make a decision within the next 60 days on whether to proceed with the proposed Keystone XL oil pipeline from Canada to the Gulf of Mexico. Republicans and some Democratic union leaders say the controversial pipeline will create thousands of new jobs; critics question its environmental impact.

A failure to act could have had major political fallout. Numerous observers believe Obama is preparing to parrot Harry Truman's 1948 campaign next year by running against an unpopular, dysfunctional Congress controlled partly by the GOP.

CNN's Jessica Yellin, Ted Barrett, Dana Bash, Kate Bolduan, Lisa Desjardins, Matt Hoye, Xuan Thai, Brianna Keilar and Deirdre Walsh contributed to this report.

ADVERTISEMENT
ADVERTISEMENT