Payroll Tax Update: McConnell Proposes Compromise
By Alan Silverleib and Tom Cohen, CNN
Washington (CNN) -- The top Senate Republican offered a compromise solution Thursday to the current congressional standoff over how best to extend the expiring payroll tax cut, but his plan is being met with resistance by House GOP leaders.
Senate Minority Leader Mitch McConnell, R-Kentucky, urged House Republicans to support a short-term extension of the expiring payroll tax cut -- similar to a two-month bipartisan measure passed overwhelmingly by the Senate and now demanded by both President Barack Obama and congressional Democrats.
In return, McConnell pushed Senate Majority Leader Harry Reid, D-Nevada, to appoint conferees to a House-Senate conference committee to iron out differences between competing plans -- something requested by House Republicans.
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"House Republicans sensibly want greater certainty about the duration of these provisions, while Senate Democrats want more time to negotiate the terms," McConnell said in a written statement. "These goals are not mutually exclusive. We can and should do both."
But House Speaker John Boehner, R-Ohio, pushed back, having his office release a statement reiterating his call for negotiators to craft an immediate one-year tax cut extension -- something considered unlikely by most congressional observers.
"We can do better," Boehner said shortly before McConnell unveiled his proposal. "It's time for us to sit down and have a serious negotiation and solve this problem."
House Majority Leader Eric Cantor, R-Virginia, insisted the differences between competing plans could probably be resolved "within an hour."
The latest maneuvering occurred against the backdrop of mounting pressure across the political spectrum for House Republicans to drop their opposition to the Senate's bipartisan agreement on a two-month extension of the payroll tax cut -- an issue many in the GOP fear is damaging the party's anti-tax reputation heading into the 2012 campaign.
Pushed by his conservative, tea-party infused House GOP caucus, Boehner continues to insist that anything short of an immediate one-year extension of the cut will only create more economic instability and do little to generate job growth.
For his part, Obama is scheduled to appear with a group of middle-class Americans Thursday as part of a White House attempt to illustrate the impact on 160 million American workers if the tax holiday expires December 31. The typical worker's take home salary will shrink by about $40 per pay period without the tax cut, or $1,000 annually.
Also at stake: extended emergency federal unemployment benefits and the so-called "doc fix," a delay in scheduled pay cuts to Medicare physicians.
Both of those measures, along with the tax holiday, are currently scheduled to expire in nine days.
Democrats and Republicans now publicly agree on the need for a one-year extension, but critics of the House GOP's stance have said a two-month extension is necessary to give negotiators more time to hammer out a deal over how to pay for the continuation. They accuse House Republicans of creating the very instability they have railed against and of needlessly creating yet another congressional crisis at the end of a year filled with Capitol Hill showdowns.
Sen. John McCain of Arizona, the GOP's 2008 presidential nominee, strongly criticized the House GOP's stance on CNN's "American Morning" Thursday.
"The Republicans are losing this fight. We need to get back on track," McCain said. "A thousand dollars a year is a big amount of money to most Americans, and I think it's very important. ... I worry about the fact that we are continuing to increase the debt and the deficit, but now it's become very symbolic, and I think it has to be done."
Illinois Sen. Dick Durbin, the number two Senate Democrat, told CNN House Republicans have completely isolated themselves politically.
They are "going down a track that even the most conservative publications and leaders in America rejected," Durbin said. "I think that John Boehner should acknowledge the fact that he cannot leave 3 million people without extension of unemployment benefits, and 160 million people -- middle income Americans -- facing a tax increase because of Republican action."
Despite mounting pressure on House Republicans to give in and pass the Senate's short-term extension, a well-placed House GOP source indicated Wednesday that his side would not consider an end-game to the standoff until next week, just days before the December 31 deadline.
Numerous Senate Republicans have indicated they feel politically undercut by their House colleagues. On Saturday, the Senate voted 89-10 -- with overwhelming GOP support -- to approve two additional months for all three programs.
The House GOP caucus, however, revolted against that blueprint, calling it an inadequate patchwork plan. On Tuesday, the House voted 229-193 on a virtual party-line basis to express its disagreement with the Senate plan and call for the creation of a House-Senate conference committee to resolve the matter -- something already ruled out by Reid.
The $33 billion "bipartisan compromise that was reached on Saturday is the only viable way to prevent a tax hike on January 1," Obama said after the House vote. "It's the only one."
The House also approved a separate resolution supporting a year-long extension of both the payroll tax cut and emergency unemployment benefits, along with a new, two-year doc fix. There is no indication, however, that congressional negotiators would be able to reach a bipartisan agreement by the end of the year.
Further complicating matters is the fact that the Senate has adjourned for the year. Most House members also left Washington after Tuesday's vote.
Boehner released a public letter to Obama Tuesday urging him to order the Senate back from its holiday break to take part in further talks -- a gesture immediately rejected by the White House. The speaker also prevented a direct vote on the Senate bill Tuesday -- a move interpreted in many quarters as a sign House GOP leaders may lack enough Republican support to defeat the Senate plan in the face of unrelenting pressure.
The Wall Street Journal -- a critical sounding board for conservatives -- blasted Boehner and his House GOP colleagues in an editorial Wednesday, arguing that they had "achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter."
"At this stage, Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly," the paper's editorial writers said. "Then go home and return in January with a united House-Senate strategy that forces Democrats to make specific policy choices that highlight the differences between the parties on spending, taxes and regulation. ... The alternative is more chaotic retreat and the return of all-Democratic rule."
"The House Republicans have painted themselves into a corner. They are on their own," a Senate Republican leadership aide told CNN Wednesday. "This is a lose-lose situation for us. (House Republicans) let the Democrats get the messaging advantage and, more specifically, we've turned one of our key issues on its head. The Republicans look like they are the ones blocking tax relief."
"When you are arguing process, you are losing, by definition," the aide said. "We are arguing process while they've got politics on their side."
A number of Republicans have said the party should have declared victory after winning an agreement by Obama -- as part of the payroll tax cut package -- to make a decision within the next 60 days on whether to proceed with the proposed Keystone XL oil pipeline from Canada to the Gulf of Mexico. Republicans and some Democratic union leaders say the controversial pipeline will create thousands of new jobs; critics question its environmental impact.
A failure to act could have major political fallout. 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.
CNN's Ted Barrett, Dana Bash, Kate Bolduan, Lisa Desjardins, Matt Hoye, Xuan Thai and Deirdre Walsh contributed to this report.
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