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Boehner announces deal with Reid on end to payroll tax impasse

Hearing anger from the people they represent, House Republicans found a way to make a deal and claim they accomplished something, too. NBC's Kelly O'Donnell reports.

House Speaker John Boehner announced Thursday that he had agreed with Senate Majority Leader Harry Reid on a two-month extension of a package including a payroll tax cut and an extension of unemployment benefits.

Boehner said in statement he and Reid "reached an agreement that will ensure taxes do not increase for working families on Jan. 1 while ensuring that a complex new reporting burden is not unintentionally imposed on small business job creators."

He said the Senate "will join the House in immediately appointing conferees, with instructions to reach agreement in the weeks ahead on a full-year payroll tax extension. We will ask the House and Senate to approve this agreement by unanimous consent before Christmas.”

Answering a reporter's question at a press conference Thursday afternoon, Boehner said he did not know if there would be unanimous consent to the accord from all the Republican House members, but said he would bring the House members back to Washington next week for a vote, if it proves to be necessary. 

The unanimous consent motions were scheduled for Thursday morning. If any member of the House or Senate objects, the motion would fail.

In a statement released by the White House, President Barack Obama said, "This is good news, just in time for the holidays. This is the right thing to do to strengthen our families, grow our economy, and create new jobs."

In his statement, Reid cautioned that "there remain important differences between the parties on how to implement these policies." He said, "Two months is not a long time, and I expect the negotiators to work expeditiously to forge year-long extensions of these critical policies."

This news of the accord came after two of Boehner’s GOP members called on him to allow the two-month extension to proceed.

Speaker John Boehner announces that the House and Senate have come to an agreement on the extension of the payroll tax cut.

Freshman Rep. Sean Duffy, R- Wisc., who represents a marginal district that was held for many years by Democrat David Obey, said, “I'm calling on GOP leadership to immediately bring up the Senate's two-month extension for an up or down vote."

Another GOP freshman Rep. Rick Crawford of Arkansas made a similar statement.

For a worker making $60,000 a year, a two-month payroll tax cut would mean $200 in additional take-home pay, or about $25 per week.

Earlier Thursday Obama renewed his call for the House to pass the two-month extension of the cut in Social Security payroll taxes and unemployment insurance benefits which Congress enacted a year ago.

President Obama challenges House Republicans to compromise and pass a payroll tax cut extension.

The only reason the impasse continues, he said, is because “a faction of House Republicans have refused to support this (two-month) compromise."

The president cited some specific people such “Joseph from New Jersey” who would have to sacrifice a pizza night with his children if the payroll tax cut did not get extended.

For the first time, Senate Republican Leader Mitch McConnell added his voice Thursday to those calling on House Republicans to allow the two-month package to become law, but he also said Senate Democratic Leader Harry Reid should appoint negotiators to try to work out a one-year accord.

McConnell urges House passage of tax deal

The Republican-controlled House has passed a one-year extension of a 4.2 percent payroll tax rate, instead of the normal 6.2 percent rate which had been in effect from 1990 to 2010.

The heart of the discord between Obama and House Republicans remains as it has been for weeks: how to offset, or pay for, the nearly $200 billion cost of the package.

The Senate on Saturday passed a two-month extension of the tax cut, after Reid and McConnell couldn’t reach an accord on how to find revenues and cut spending to offset a one-year package.

The Senate-passed bill includes a provision requiring Obama to make a decision within 60 days on whether or not to approve the building of an oil pipeline from Canada, the Keystone XL pipeline.

While House GOP members continue to flaunt the fact that they are in Washington and ready to work, the Senate is home for the holidays. Sen. Bob Casey, D-Pa., discusses.

The Senate bill says Obama could refuse to permit the pipeline to be built if he “determines that the Keystone XL pipeline would not serve the national interest.”

Both the House and Senate bills would extend unemployment insurance benefits and prevent a nearly 30 percent cut in Medicare’s payments to doctors.

The cost of House bill would be offset by requiring higher-income people to pay more for their Medicare coverage and by extending through 2013 a cost of living freeze on the pay of federal employees, including members of Congress.

The Senate bill would be offset by higher fees on home mortgages guaranteed by federally backed Freddie Mac and Fannie Mae.

Most congressional Democrats would prefer to pay for a one-year extension of the payroll tax cut and unemployment benefits by imposing a 1.9 percent surtax on income above $1 million a year, but Republicans have rejected that as a burden on small business owners.

The payroll tax cut is intended to provide a stimulus to the sluggish economy, which is growing at less than a two percent annual rate, but Douglas Elmendorf, the director of the non-partisan Congressional Budget Office, told the Senate Budget Committee in testimony on Nov. 15 that “the majority of the temporary increase in take-home pay” from a payroll tax cut “would be saved rather than spent.”

Elmendorf said a more cost-effective stimulant to the economy would be increase in unemployment benefits. “Households receiving unemployment benefits tend to spend the additional benefits quickly, making this option both timely and cost-effective in spurring demand for goods and services, and thereby economic activity and employment.”

A worker's maximum earnings subject to the Social Security payroll tax this year is $106,800. In 2012 the taxable maximum will be $110,100. Roberton Williams, an analyst at the nonpartisan Tax Policy Center in Washington, said that “60 percent of an extended payroll tax cut would go to households making more than $100,000.”