House Republicans Defer to Senate, Agree to Extension of Payroll Tax Cut

WASHINGTON (The Blaze/AP) -- In an abrupt about-face, House Republican leaders Thursday agreed to a two-month extension of a Social Security payroll tax cut and federal unemployment benefits, GOP aides said.

The move reflects a bowing to demands by the Senate and President Barack Obama and appears to all but assure 160 million workers aren't hit by a 2 percentage point increase in the payroll tax on Jan. 1.

It also would renew jobless benefits for almost 2 million people without jobs for more than six months and spare doctors from a big cut in Medicare payments. House Republicans were to hold a telephone conference call on the developments later Thursday.

House Republicans balked at the bipartisan Senate bill earlier this week, and their leaders, as recently as Thursday morning, had insisted that the Senate begin talks on a one-year measure passed by the House last week. The Senate passed a 2-month extension on Saturday.

The decision came swiftly after the top Republican in the Senate, Minority Leader Mitch McConnell of Kentucky, urged the House to accept a short-term measure.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Their isolation complete, House Republicans began Thursday to cave to demands by President Barack Obama, Democrats and key Republicans for a short-term renewal of payroll tax cuts for 160 million Americans.

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Two members of the uncompromising class of House GOP freshmen piled behind the growing call for a short-term extension, developments that suggested the conservative opposition had begun to crumble. Republican House leaders were expected to convene a conference call to discuss whether to change course, according to a House GOP aide who spoke on condition of anonymity.

"I don't think that my constituents should have a tax increase because of Washington's dysfunction," said freshman Rep. Sean Duffy, R-Wis., a former reality show star.

"An `all or nothing' attitude is not what my constituents need now," Rep. Rick Crawford, R-Ark., wrote in a letter to House Speaker John Boehner. "We are now in a position...that requires Republicans to not only demand a willingness to compromise, but to offer it as well."

The statements were fresh signs that House Republicans may not be able to withstand pressure from their constituents and almost every corner of the GOP to get behind the Senate's two-month tax cut extension passed last week with the support of 39 Republicans.

Duffy and Crawford got inspiration earlier in the day from Senate Majority Leader Mitch McConnell, who urged the House to do what Boehner has refused: pass a short-term extension of the payroll tax cut before it expires and paychecks shrink just as Americans begin paying their holiday bills. Meanwhile, McConnell said in a statement, Senate Majority Leader Harry Reid should convene negotiators to work with Boehner's team and craft a longer-term renewal. The legislation also includes jobless aid for millions and relief for doctors facing a huge cut in Medicare payments. Two Republican senators, Olympia Snowe of Maine and Mike Johanns of Nebraska also endorsed McConnell's plan Thursday.

This, as President Barack Obama has underscored that only swift action can head off an increase of 2 percentage points in the Social Security tax paid by employees.

"This is an issue where an overwhelming number of people in both parties agree," Obama said in an appearance in which he was flanked by several people who had tweeted the White House about how they would be hurt by higher taxes. "Has this place become so dysfunctional that even when people agree to things we can't do it?" He added: "Enough is enough."

The rapid-fire developments underscored the fragility of the standoff at a time when Americans deeply disapprove of Congress and are struggling to make it in an economy slowly recovering from. Politics also play a significant role: the standoff put Republican presidential candidates in an awkward position fewer than two weeks before the Iowa caucuses that begin the nomination process, on the cusp of the 2012 elections.

In competing news conferences and statements, all sides sought to avoid blame should taxes go up Jan. 1, just as Americans begin paying holiday bills. House Republicans in particular were facing fire from GOP establishment figures incensed that they would risk losing the tax cut issue to Democrats at the dawn of the 2012 presidential and congressional election year.

McConnell's move intensified pressure on Boehner, R-Ohio, to cut his losses and agree to a short-term bill. But Boehner is thus far holding firm.

In a Thursday morning phone call, Boehner urged Obama to send administration officials to the Capitol to negotiate an agreement on a long-term measure demanded by Republicans. Obama declined the offer.

"The president told Speaker Boehner that he is committed to begin working immediately on a full-year agreement once the House passes the bipartisan Senate compromise that prevents a tax hike on 160 million Americans on January 1," said a White House statement.

McConnell weighed in, saying the House should pass a short-term extension that ensures no disruption in the expiring payroll tax cuts and Reid should appoint negotiators allowing Congress to "work on a solution for the longer extensions."

McConnell's move was welcomed by Democrats but received a tepid reaction from Boehner.

"We believe, as Senator McConnell suggested, the two chambers should work to reconcile the two bills so that we can provide a full year of payroll tax relief - and do it before year's end," said Boehner spokesman Kevin Smith. He declined to comment on McConnell's suggestion that House Republicans back away from their insistence on a year-long extension - or none.

But Rep. Dave Camp of Michigan, the powerful chairman of the tax-writing Ways and Means Committee and a House negotiator on this issue, suggested that he would be open to a three-month extension.

House Republicans have complained that the Senate's proposed 60-day extension would be hard for companies to implement and would be too complicated for businesses - which file taxes every three months - to manage.

The Senate passed the two-month measure after Reid and McConnell tried but failed last week to come up with a long-term extension. Reid said that if the House passes a short-term measure he'll restart talks on a year-long plan.

"We have made good progress towards a year-long extension of all of these programs, but there remain important differences between the two parties," Reid said. "Once the House passes the Senate's bipartisan compromise ... I will be happy to restart the negotiating process to forge a year-long extension."

McConnell's idea would require the House to generate a new bill - which could address the flaws Republicans have complained about - and send the measure to the Senate. It would take unanimous agreement by the Senate to pass the measure Tuesday or Friday.

The Republican establishment was putting special pressure on House Republicans who were refusing to compromise. The 2008 GOP presidential nominee John McCain, former Bush administration Karl Rove and The Wall Street Journal editorial page were among the conservative voices urging Republicans on Capitol Hill to get it together.

The impasse also put Republican presidential contenders in an awkward spot less than two weeks before the Iowa caucuses that kick off the nomination process. Former Massachusetts Gov. Mitt Romney refused to be pinned down on the issue, while former House Speaker Newt Gingrich castigated Congress for "an absurd dereliction of duty."