Extension of Tax Cut Stalls in House as G.O.P. Objects

By JENNIFER STEINHAUER

Published: December 18, 2011 - New York Times

WASHINGTON — The House Republican leader on Sunday flatly rejected a short-term, bipartisan Senate measure to extend a payroll tax break and unemployment insurance, setting the stage for a bitter year-end Congressional collision and the potential loss of benefits for millions of Americans.

In an interview on “Meet The Press” on NBC, Speaker John A. Boehner said his members broadly opposed the two-month extension that passed the Senate 89 to 10, believing that it would be “just kicking the can down the road.”

“It’s time to just stop, do our work, resolve the differences and extend this for one year,” Mr. Boehner said. “How can you have tax policy for two months?”

The surprising setback threatened the holiday plans of lawmakers and President Obama, deeply embarrassed Republican leaders in both chambers and raised the specter of a year-end tax increase that economists have warned could set back the already fragile economic recovery.

The House is scheduled to take up the Senate bill — passed in a rare Saturday session — when members return to Capitol Hill on Monday night. House leaders expect the bill to fail and their members to then consider and perhaps vote on an amended version that same night.

Democrats, led by Senator Harry Reid, the majority leader, reacted angrily to the turn of events in the House.

“When we met last week, Speaker Boehner requested that Senator McConnell and I work out a compromise,” Mr. Reid said, referring to the minority leader, Senator Mitch McConnell of Kentucky. “Neither side got everything they wanted, but we forged a middle ground that passed the Senate by an overwhelming bipartisan majority.”

Although Mr. McConnell, like scores of his colleagues, voted for the Senate-brokered bill, he retreated from the measure on Sunday, throwing his support behind Mr. Boehner’s idea to come up with a yearlong extension, which was the original goal of Mr. Obama and Senate Democrats.

“The House and the president both want a full-year extension,” Don Stewart, a spokesman for Mr. McConnell, said in an e-mail to reporters. “The best way to resolve the difference between the two-month extension and the full-year bill, and provide certainty for job creators, employees and the long-term unemployed, is through regular order, as the speaker suggested.”

The once-seemingly sure deal, which allowed the Senate to recess for the year, was for a $33 billion package of bills to keep the Social Security tax paid by most workers at 4.2 percent rather than 6.2 percent, extend unemployment benefits for those already receiving them, and avoid reductions in Medicare payments to doctors. The measure would be effective through February.

But the deal slid off the rails abruptly on Saturday, just hours after the Senate vote, when House Republicans balked after being briefed about the terms by their leaders. Even a sweetener provision to speed the decision process for construction of an oil pipeline from Canada to the Gulf Coast could not mollify them. Mr. Boehner had called the provision a “victory.”

So in a matter of hours, a hastily written agreement between Senate leaders — one Mr. McConnell said Saturday on the Senate floor was “not designed to fail but designed to pass” — gave way to chaos..

Just how hard Mr. Boehner tried to sell the bill is a matter of debate. Some Republican aides said that Mr. Boehner had warned Mr. McConnell his conference would be wary of the Senate deal, and that Mr. Boehner had presented it to his members in the conference call as one of several options. But a number of House members who participated in the call said Mr. Boehner told them they should accept the deal, however imperfect, and fight for a better one next year.

Republican leaders are seeking a deal for a full-year extension of the payroll tax cut to try to blunt what are certain to be Democratic accusations heading into an election year that Republicans are against tax cuts for low- and middle-income workers.

The conflict over the Senate bill reflects the fundamental unease that many rank-and-file Republicans have expressed for weeks over extending the tax holiday, which would replace the tax increase that would have gone toward the Social Security fund with general fund money.

It also mirrors a well-established pattern of House conservatives undermining Mr. Boehner’s efforts to reach bipartisan compromises on a variety of fiscal matters. In July, Mr. Boehner and Mr. Obama were close to reaching a large deficit-reduction agreement but retreated when it became clear that the most conservative House Republicans would not agree to new revenue measures like increasing the income tax paid by the wealthy.

“We are witnessing a pattern of Speaker Boehner walking away from bipartisan compromises to kowtow to his extreme Tea Party wing of his caucus,” Representative Chris Van Hollen, Democrat of Maryland, said in a statement. “This is the latest example of the Tea Party Republicans sacrificing the good of the country on the altar of extreme ideology.”

While some Republicans said Sunday that it was clear last week that House members might dislike the Senate bill, there was little indication of that on Saturday. Senators finished up the last bits of their business, including the vote on the payroll tax extension and a large spending bill, said their goodbyes and left for the holidays.

Senate Democrats indicated on Sunday that they had no intention of returning to Washington before the opening of the next session in January.

“There are only two choices for the House Republicans at this point,” said Senator Charles E. Schumer of New York, the No. 3 Democrat in the Senate. “Pass this bipartisan compromise or else they alone will be responsible for letting taxes rise on the middle class.”

There is a slight possibility that some Republicans would join with Democrats to pass it, which would be a disaster for Mr. Boehner’s leadership. Mr. Boehner could also amend the bill to include a one-year extension of the payroll tax reduction and some conservative policy riders to make it acceptable to a majority of his conference, and hope that the Senate would return to negotiate a new bipartisan conference measure based on the two chambers’ bills.