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Payroll Tax Update: Boehner Announces Deal

boenerUpdated 2:35 p.m. PT:

House Speaker John Boehner on Thursday announced an agreement with Senate Democratic leader Harry Reid to extend the payroll tax cut for two months.

The deal amounted to a reversal of the opposition by House Republicans of the two-month extension passed by the Senate.

According to Republican and Democratic sources, previously recalcitrant House GOP leaders agreed to the short-term extension of the tax break to allow time for further negotiations.

Those terms were part of a bipartisan Senate deal that President Barack Obama and congressional Democrats demanded the House accept.

The deal also includes the addition of legislative language to ease the administrative burden on small businesses implementing the plan, Boehner said in a statement.

“We will ask the House and Senate to approve this agreement by unanimous consent before Christmas,” Boehner said, indicating the chambers could pass the plan without objection so that members don’t have to return to Washington from their holiday recess.

Posted 2 p.m. PT:
Washington (CNN)
— House Republicans will hold a conference call at 5 p.m. Thursday amid indications of a possible deal to extend the payroll tax cut before it expires on January 1, a top Republican source has told CNN.

Previously recalcitrant House GOP leaders have agreed to a two-month extension of the tax break to allow time for further negotiations — terms previously included in a bipartisan Senate deal and demanded by President Barack Obama and congressional Democrats.

The deal also includes legislative language to ease the administrative burden on small businesses implementing the plan, the aide noted.

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The development comes hours after Senate Minority Leader Mitch McConnell, R-Kentucky, called for a short-term extension to end the standoff, increasing pressure on House GOP leaders to end their resistance to such a step.

House Speaker John Boehner, R-Ohio (pictured above), initially rejected McConnell’s call, instead releasing a statement that reiterated his call for negotiators to craft an immediate one-year tax cut extension — something that has been considered extremely unlikely by most congressional observers.

With nine days until the payroll tax cut is set to expire, bringing a tax increase averaging $1,000 for American workers, the ongoing impasse pitting the House Republican leadership against the White House, congressional Democrats and fellow Republicans is the kind of political gamesmanship that Americans dislike about Congress, President Barack Obama said earlier Thursday.

At issue has been whether the House should pass the two-month Senate compromise. That deal passed last Saturday by an 89-10 vote, with strong Republican support, after Senate negotiators were unable to agree on a one-year extension.

Boehner instead 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.

On Thursday, McConnell’s proposal and calls by other conservative Republicans for the House to accept a short-term extension showed the tide turning against Boehner and his GOP leaders.

McConnell urged House Republicans to support an unspecified temporary extension of the payroll tax holiday. In return, he pushed Senate Majority Leader Harry Reid, D-Nevada, to appoint conferees to a House-Senate conference committee to iron out differences over a one-year extension — something requested by House Republicans.

“House Republicans sensibly want greater certainty about the duration of these provisions, while Senate Democrats want more time to negotiate the terms,” McConnell said in a written statement. “These goals are not mutually exclusive. We can and should do both.”

McConnell and Reid spoke later Thursday, according to a Senate source, but no details on what they discussed were immediately available.

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.

“Leader McConnell was right to ask Senator Reid to appoint conferees, and the House should pass the Senate compromise while we continue searching for a resolution by February,” Johanns said in a statement, while Duffy said he would support anything to avoid a January 1 tax hike.

“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.”

However, Boehner continued to resist such calls, telling reporters earlier Thursday that “we can do better.”

“It’s time for us to sit down and have a serious negotiation and solve this problem,” he said.

Obama 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, or $1,000 annually.

“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.”

“So far, the only reason it hasn’t landed on my desk … is because a faction of House Republicans have refused to support this compromise,” the president added. “Has this place become so dysfunctional that even when people agree to things we can’t do it? It doesn’t make any sense.”

Reid, 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 is damaging the party’s anti-tax reputation heading into the 2012 campaign.

Pushed by his conservative, tea party-infused House GOP caucus, Boehner continues to insist that anything short of an immediate 12-month extension of the tax holiday will 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, are currently scheduled to expire in nine days.

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

They accuse House Republicans of creating the very instability they have 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 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.

A Senate GOP leadership aide told CNN Wednesday that House Republicans had “painted themselves into a corner.”

“This is a lose-lose situation for us. (House Republicans) let the Democrats get the messaging advantage and, more specifically, we’ve turned one of our key issues on its head,” the aide said. “The Republicans look like they are the ones blocking tax relief.”

“When you are arguing process, you are losing, by definition,” the aide added. “We are arguing process while they’ve got politics on their side.”

Despite mounting pressure on House Republicans to give in and pass the $33 billion Senate bill, a well-placed House GOP source indicated Wednesday that his side would not consider an end-game to the standoff until next week, just days before the December 31 deadline.

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

The House GOP caucus, however, revolted against that blueprint, calling it an inadequate patchwork plan. On Tuesday, the House voted 229-193 on a virtual party-line basis to express its disagreement with the Senate bill and call for the creation of a House-Senate conference committee to resolve the matter — something previously ruled out by Reid.

The House also approved a separate resolution supporting a year-long extension of both the payroll tax cut and emergency unemployment benefits, along with a new, two-year doc fix.

Further complicating matters is the fact that the Senate has adjourned for the year. Most House members also left Washington after Tuesday’s vote.

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 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 Ted Barrett, Dana Bash, Kate Bolduan, Lisa Desjardins, Matt Hoye, Xuan Thai, and Deirdre Walsh contributed to this report.

Payroll Tax Update: Boehner Announces Deal

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