Deal on payroll-tax cut starts to unravel

All sides insist they want to see a yearlong extension of the payroll-tax cut, but its chances dimmed Monday as House Republicans spurned the Senate’s two-month compromise offer and demanded face-to-face negotiations - something Senate Democrats rejected out of hand.

Senators have already escaped Washington for a monthlong vacation, and Senate Majority Leader Harry Reid, Nevada Democrat, said Monday he won’t bring his troops back or begin to negotiate a full-year deal until the House agrees to a two-month tax-cut extension.

But House Republicans said they want a full year’s worth of certainty for taxpayers, and Speaker John A. Boehner told senators to cut short their vacations and come back to town for face-to-face talks.

“Our members do not want to just punt and do a two-month short-term fix where we have to come back and do this again,” the Ohio Republican said “We’re here. We’re willing to work.”

Republicans huddled behind closed doors for more than two hours Monday evening, then emerged to announce they were postponing a vote on rejecting the Senate bill until Tuesday.

It had been planned for late Monday night, but the leaders said they wanted to hold the vote in the light of day. Mr. Boehner told reporters he has enough support to block the Senate bill and officially request a conference committee, which is where House and Senate negotiators traditionally hammer out final agreements.

The stalemate marks a stunning turnaround from Saturday, when the Senate voted 89-10 for the two-month extension, arguing it was the best they could do with the year-end deadline looming.

They said it at least gave Congress some time to consider a full-year bill.

Watching the situation deteriorate, a handful of Senate Republicans on Monday urged their House counterparts to rethink their opposition.

“A two-month extension is a good deal when it means we avoid jeopardizing the livelihoods of millions of American families,” said Sen. Scott P. Brown, Massachusetts Republican.

At stake is the payroll tax, which was lowered from 6.2 percent to 4.2 percent this year. Republican and Democratic leaders say they want the cut extended, but are sparring over how to offset the lost revenue.

Also riding on the final deal are an extension of unemployment benefits, higher payment rates for doctors who treat Medicare patients and a provision that would require President Obama to approve the Keystone XL oil pipeline unless he deems it a national-security risk.

Last week, House Republicans powered through a bill that extends the payroll-tax cut through the end of 2012, extends the higher doctor payments, includes the pipeline provision and ties another year of unemployment benefits to new rules pushing for drug testing and education requirements for those claiming the benefit.

Democrats rejected that proposal, and instead Mr. Reid and Senate Minority Leader Mitch McConnell - the top Democrat and Republican in the Senate - cut a deal that extended the tax cut, the doctor payments and unemployment benefits for two months, though without the overhaul the House GOP demanded. The Senate did include the Keystone pipeline language.

The Senate compromise passed overwhelmingly, and Mr. Reid said Monday morning that the House must pass that before he will enter into any talks on a yearlong bill.

“I will not reopen negotiations until the House follows through and passes this agreement that was negotiated by Republican leaders, and supported by 90 percent of the Senate,” Mr. Reid said in a statement.

Still, the Senate deal began to show cracks. Corporate payroll analysts said a two-month tax cut would be a major problem for companies to implement.

At the White House, presidential spokesman Jay Carney said passage of the two-month extension is Mr. Obama’s “highest priority,” essential to protecting 160 million Americans from a tax increase on Jan. 1.

Even with those high stakes, though, Mr. Carney said, the president has not called Mr. Boehner to try to get negotiations going.

“It is not our job to negotiate between him and Senate Republicans,” Mr. Carney said. “It was certainly our expectation, and we certainly had reason to believe, that there was support in the House for a measure that would ensure that Americans didn’t have their taxes go up in 12 days.”

The White House spokesman said only 25 or 30 Republican votes would be needed in the House to pass the Senate version.

“It should be passed,” Mr. Carney said. “It has overwhelming support. I don’t think this is a - too much of a long shot to say that 25 Republicans in the House might break ranks and say: ’You know what, I don’t want to go home and explain to my constituents why I voted to raise taxes on them’ - on middle-class, working Americans.”