GOP leaders hope for agreement on payroll tax cut

WASHINGTON – The Senate rejected dueling Democratic and Republican plans for extending the Social Security payroll tax on Thursday as partisan skirmishing continued over a cornerstone of President Barack Obama's plan for breathing life back into the American job market.

The votes demonstrated both parties' inability to prevail in the Senate over how to renew the payroll tax reduction and left the spotlight on the GOP-run House.

There, House Speaker John Boehner said Thursday he's confident that Republicans are ready to move on legislation continuing a payroll tax cut, but the GOP remained on a collision course with Obama over a side issue.

Republicans want to couple continuation of the Social Security payroll tax cut with a provision that would assure construction of an oil pipeline from Canada to Texas — a move Obama has said would lead to a veto.

The president, speaking to reporters at the White House Thursday, said Congress must act on the payroll tax cut before leaving for the holidays and said he would delay his Hawaiian vacation and stay in Washington "as long as it takes" to win extensions of the payroll tax cut and jobless benefits for the long-term unemployed.

"I do not expect Congress to go home unless the payroll tax cut is extended and unless unemployment insurance is extended," Obama said. "It would be wrong for families, but it would also be wrong for the economy as a whole."

Meanwhile, Boehner, R-Ohio, told reporters that "I feel confident in our ability to move ahead" after GOP leaders previewed legislation to extend the payroll tax cuts and unemployment benefits in a meeting of the rank and file Thursday morning. He said the party would aim for a vote next week.

The measure has been in the drafting stage for more than a week, as Boehner and other leaders sought to coax lawmakers to support a payroll tax cut extension. Critics of that legislation have said they don't believe payroll tax relief helps create jobs, but even some of them conceded that House leaders seem to have won enough support to prevail.

"I think they've got the votes for it," said conservative Rep. Jeff Flake, R-Ariz., who attributed much of the momentum to a GOP desire to confront Obama over the oil pipeline.

The House GOP bill — which is still being put into final form — would also gradually reduce the current maximum of 99 weeks of coverage for the long-term unemployed to 57 weeks while giving states the right to use some of their federal unemployment funds for experimental programs like job training, Republican participants said. They said these changes also helped round up GOP support.

In addition to extending the Social Security payroll tax cut and benefits for the long-term unemployed, the measure has been broadened to avert a threatened 27 percent cut in payments to doctors who treat Medicare patients. All three items carry a Dec. 31 deadline for action.

The House measure varies on several points from legislation that Obama and congressional Democrats want, but the president seemed eager on Wednesday to draw a line at items he described as extraneous. His veto threat was specifically linked to any requirement for the construction of the Keystone XL oil pipeline, a project that he recently put on hold until after the 2012 election.

"Efforts to tie a whole bunch of other issues to what's something that they should be doing anyway will be rejected by me," he said.

Obama did not say which other items he had in mind.

Republicans said they welcomed a fight over the pipeline, which they have described as shovel-ready and promising 20,000 new jobs at a time of high unemployment.

"Frankly, the fact that the president doesn't like it makes me like it even more," said Rep. Jim Jordan, R-Ohio, a leader of House conservatives.

Obama would lower the 6.2 percent payroll tax that workers normally pay to 3.1 percent next year, part of his effort to breathe life into the country's ailing job market. He also wants to trim the payroll taxes that employers pay to give them an incentive to hire people.

The House bill would drop next year's payroll tax to 4.2 percent, the same as this year's level, with no tax breaks for companies. It would be financed by extending the current pay freeze on federal workers through 2015 and a host of smaller savings, including charging higher Medicare premiums to higher-earning seniors.

A 2 percentage point reduction in the payroll tax means a tax cut of $1,000 to an earner making $50,000 a year.

The Democratic-led Senate voted Thursday to reject a Democratic bill that would lower next year's payroll tax to 3.1 percent. It is financed chiefly by a 1.9 percent surtax on income over $1 million, a proposal that is almost universally opposed by Republicans, who say it would discourage business owners from hiring.

The vote was 50-48 — 10 short of the 60 votes needed for passage.

Minutes later, the Senate rejected a less generous Republican measure 76-22. That vote saw most GOP senators — 25 — vote against their own party's bill, underscoring Republican divisions on the issue. The bill would have left next year's payroll tax at 4.2 percent and paid for it largely by freezing salaries and cutting the size of the federal workforce.

Both sides knew they would lose but were hoping the roll calls would produce fodder for campaign ads.

Asked Wednesday by reporters whether he might eventually accept spending cuts to pay for the bill, Reid showed some flexibility.

"We're ruling nothing out, OK?" Reid said, other than budget cuts to federal agencies, which have already been sliced twice this year.