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Obama, Boehner square off in payroll tax fight

By Tom Cohen and Alan Silverleib, CNN
December 21, 2011 -- Updated 1453 GMT (2253 HKT)
STORY HIGHLIGHTS
  • NEW: Veteran Sen. McCain says the dispute is hurting Republicans
  • President Obama calls on House leaders to hold a direct vote on the Senate plan
  • Speaker Boehner asks Obama to call back the Senate
  • Sen. Reid says Senate Democrats won't agree to House GOP demands to restart talks

Washington (CNN) -- The congressional impasse over extending the payroll tax cut became a showdown Tuesday between President Barack Obama and House Speaker John Boehner.

After the Republican-controlled House passed a measure calling for more negotiations, Boehner made public a letter to Obama that urged him to order the Senate back from its holiday break to take part in further talks.

Leaders in the Democratic-controlled Senate reject that idea, and Obama agreed with them, telling reporters in a previously unscheduled appearance that the House must approve a two-month extension passed by an 89-10 vote in the Senate.

"The bipartisan compromise that was reached on Saturday is the only viable way to prevent a tax hike on January 1," Obama said. "It's the only one."

The House motion, passed Tuesday with no Democratic support on a 229-193 vote, expressed the chamber's disagreement with the Senate plan and called for the dispute to be immediately taken up by a House-Senate conference committee -- something already ruled out by Senate Majority Leader Harry Reid, D-Nevada.

However, Boehner and the Republican leadership prevented a direct vote on the Senate's two-month extension, signaling they may lack enough GOP support to defeat it in the face of unrelenting pressure from the White House, Democrats and some Senate Republicans.

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Instead, the House approved a separate resolution supporting a yearlong extension of both the payroll tax cut and emergency federal unemployment benefits. House Republicans are also pushing for a new, two-year "doc fix," or delay in significant scheduled pay cuts to Medicare physicians.

All three measures are set to expire December 31.

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Meanwhile, House members headed out of town for their holiday break after legislative business ended Tuesday.

The Senate measure approved Saturday called for a two-month extension of the payroll tax cut, unemployment benefits and the "doc fix" spending. It was a fallback plan designed to give both sides more time to negotiate.

Now that short-term compromise has slammed into a conservative roadblock in the House, where rank-and-file Republicans are fuming over the two-month time period of the plan, among other things.

The lingering dispute is hurting his party, veteran Republican Sen. John McCain of Arizona told CNN, adding that the reality of the issue is that the payroll tax cut must be extended to help out Americans still struggling in the economic recovery.

"It is harming the Republican Party," McCain said. "It is harming the view, if it's possible any more, of the American people about Congress."

As the clock ticks down, nobody appears willing to bend and neither side seems to know how to break the logjam. Boehner, R-Ohio, appointed House GOP negotiators for a conference committee, but Democrats say they have no plans to do the same.

According to House Republican sources, their strategy is to generate as much news coverage as possible of their appointed conferees in coming days to keep the pressure on Democrats to negotiate.

"We are going to try to remind people that we are still in town ready to work," said one House GOP leadership aide.

One of the House negotiators, Rep. Fred Upton, R-Michigan, told CNN that he has already notified his wife that he will be in Washington for Christmas.

Boehner called for Obama to order the Senate to return from its holiday recess and appoint negotiators. The House already has come back from its holiday break to respond to the Senate's two-month proposal.

In a letter to Obama made public by Boehner's office, the speaker said, "I ask you to call on the Senate to return to appoint negotiators so that we can provide the American people the economic certainty they need."

"Who doesn't believe that if we don't do this now that when we get to February 28th, guess where we'll be? We'll be right here doing the same thing that we are doing right now. I just think the American people expect us to do our work," Boehner said during debate on the House floor.

White House spokesman Jay Carney told reporters Tuesday that the House needs to pass the Senate two-month extension so that a full one-year extension can be worked out.

"In order for it to get done, it has to pass the House," Carney said, adding that Obama "cannot order the extension of the payroll tax cut. Congress has to take action."

Obama then made his surprise appearance in the White House briefing room and called for Boehner to allow an up-or-down vote on the Senate proposal.

"House Republicans refuse to allow a vote," Obama said, noting that Senate leaders from both parties had agreed to the short-term extension in order to guarantee that taxes don't increase for working Americans while negotiations continue early next year on the one-year extension that House Republicans say they support.

"What they're really holding out for is to wring concessions from Democrats on issues that have nothing to do with the payroll tax cut," Obama said of House Republicans.

Neither Reid nor House Minority Leader Nancy Pelosi, D-California, would appoint Democratic negotiators for the conference committee proposed by House Republicans. Boehner named eight House Republicans as his representatives, but there was no word on Senate Republican conferees.

The mistrust between the parties was palpable. When asked if Democrats were to blame for the impasse by refusing to name conference committee negotiators, Pelosi said the issue was the refusal by House Republicans to go along with the bipartisan support for the Senate plan.

"Whatever they say is irrelevant," Pelosi declared about Republican claims of wanting a one-year payroll tax cut extension. "What they do is what's important, and what they're doing is not giving a payroll tax cut to 160 million Americans."

House Republicans, meanwhile, repeatedly suggested the 60-day extension in the Senate plan would be the limit of action on the issue if it passed, rejecting insistence by Obama and Reid that they wanted to continue working for a longer deal during the first two months of 2012.

"We're going to drag them kicking and screaming to a conference," said Rep. Andy Harris, R-Maryland.

A failure to act could have major economic and political fallout. The payroll tax break alone is worth roughly $1,000 a year for an average family and affects about 160 million Americans.

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.

"This effort is more toward securing votes than toward securing economic growth," said conservative Republican Rep. Jeff Flake of Arizona.

The House GOP leaders' decision not to hold a direct up-or-down vote on the $33 billion Senate plan -- an apparent reversal of earlier plans -- came after a two-hour meeting of the entire House Republican caucus late Monday.

Pelosi told reporters that the change probably meant that Boehner and his lieutenants lacked enough support from their own members to guarantee a defeat for the Senate bill.

In the 434-member House chamber -- one seat is currently vacant -- the 242-seat Republican majority can only afford 26 defections to overcome a unified 192-seat Democratic minority.

A House GOP leadership aide conceded to CNN that it is a "cleaner message" to simply vote to affirm the House position on extending the payroll tax cut for a year, instead of opposing a two-month extension.

"We outright reject the attempt by the Senate to kick the can down for 60 days," Cantor said after Monday night's caucus meeting.

Carney emphasized that the bipartisan support in the Senate showed it was House Republicans in the minority on the issue, with the White House, Democrats and Senate Republicans all calling for the two-month extension.

Democratic legislators, meanwhile, said it was Republicans blocking progress in Congress. Senate Republicans objected to a floor vote on the House GOP payroll tax plan, while House Republicans now have prevented an up-or-down vote on the Senate measure that had broad GOP support, they said.

Boehner, however, said Monday night that "we disagreed with what the Senate produced."

"They did their job," he said of his call last week for the Senate to send the House a proposal. "They produced a bill, and the House disagreed with it."

While there are sharp differences over how to proceed, both the House and Senate versions of the legislation extend the tax cut, unemployment benefits and the doc fix. Both measures also would push for presidential action on the proposed Keystone XL oil pipeline from Canada to the Gulf of Mexico -- something demanded by Republicans.

Meanwhile, five mostly moderate Republican senators have called for the House to support the Senate's two-month extension. The group consists of Sen. Scott Brown of Massachusetts, Sens. Olympia Snowe and Susan Collins of Maine, Sen. Richard Lugar of Indiana and Sen. Dean Heller of Nevada.

Brown issued a statement after Tuesday's House vote that said House Republicans "would rather continue playing politics than find solutions."

"Their actions will hurt American families and be detrimental to our fragile economy," said Brown, who is facing a stiff re-election challenge in heavily Democratic Massachusetts next year. "We are Americans first; now is not the time for drawing lines in the sand."

Meanwhile, five Democratic senators called on House Republicans to pass the Senate plan in order to speed up approval of the Keystone pipeline.

Boehner appears to have reversed himself since a conference call with caucus members Saturday, when he was the only House Republican leader to express support for the Senate plan, according to a GOP source.

The source said Boehner described the Senate vote as "a good deal" and "a victory" in the conference call. For his part, the speaker insisted Tuesday that he raised concerns about the Senate plan when he first heard of it.

"The rank-and-file members are extremely opposed" to the Senate plan, a GOP source stressed, adding that most members were concerned about the uncertainty caused by just a two-month extension, as well as the political benefit the White House could gain in the national dialogue over taxes.

The Senate's two-month measure would reduce the deficit by nearly $3 billion, according to the Congressional Budget Office.

Under the plan, the $33 billion in costs would be offset by an increase in the fees that new homeowners with federally backed mortgages would pay to Fannie Mae, Freddie Mac and the Federal Housing Administration. Those entities would then turn that money over to the U.S. Treasury.

The bump would amount to about $15 per month for every $200,000 borrowed, Senate aides estimated.

Most senators agreed on a two-month extension as a fallback position after Democrats and Republicans were unable to reach a more long-term, comprehensive agreement.

CNN's Athena Jones, Rebecca Stewart, Deirdre Walsh, Ted Barrett, Kate Bolduan, Dana Bash, and Erin Burnett contributed to this report.

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