House GOP rejects two month payroll tax cut; Emerson votes no to Senate proposal

WASHINGTON -- The House on Tuesday rejected legislation to extend a payroll tax cut and jobless benefits for two months, drawing a swift rebuke from President Barack Obama that Republicans were threatening higher taxes on 160 million workers on Jan. 1.

Obama, in an appearance in the White House briefing room after the House vote, said the two-month compromise is the only way to stop payroll taxes from going up by two percentage points.

"Now let's be clear," Obama said in a surprise appearance in the White House briefing room. "The bipartisan compromise that was reached on Saturday is the only viable way to prevent a tax hike on Jan. 1. The only one."

Obama said failure to pass the Senate version of the payroll tax cut extension could endanger the U.S. economic recovery, which he described as "fragile but moving in the right direction."

House Republicans controlling the chamber want instead immediate negotiations on a year-long plan with the Senate -- where the top Democrat again ruled out talks until the House passes the stopgap measure.

"President Obama needs to call on Senate Democrats to go back into session ... and resolve this bill as soon as possible," said House Speaker Boehner, R-Ohio. "I need the president to help out."

If Congress doesn't break the stalemate and pass a bill by the end of the year, payroll taxes will go up by 2 percent for 160 million workers on Jan. 1. Almost 2 million people could lose unemployment benefits in January as well, and doctors would bear big cuts in Medicare payments.

The House vote, 229-193, kicks the measure back to the Senate, where the bipartisan two-month measure passed on Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid, D-Nev., says he won't allow bargaining until the House approves the Senate's short-term measure.

"I have been trying to negotiate a yearlong extension with Republicans for weeks, and I am happy to continue doing so as soon as the House of Representatives passes the bipartisan compromise to protect middle-class families, but not before then," said Senate Majority leader Harry Reid, D-Nev.

Sen. Claire McCaskill, D-Mo., was on the road Tuesday, and her office pointed to her Twitter response, which criticized House Republicans: "R[epublican']s in [the H]ouse will fiercely fight to prevent taxes going up even a dime on [the] mega-wealthy, but ok with taxes going up on working families. Weird."

Sen. Roy Blunt's office pointed to an interview Blunt gave on CNN Sunday, in which Blunt agreed that a yearlong tax break would have been better. But he suggested then that his colleagues in the House should work through this.

U.S. Rep. Jo Ann Emerson was one of the votes Tuesday that kicked the measure back to the Senate.

"Obviously one year is preferable to two months because it brings some certainty," Emerson said. "... I think we should have extended it for a year."

Still, the Cape Girardeau Republican said there was time yet before the Jan. 31 deadline. Work could continue Monday, despite the fact that is the day after Christmas.

"I'm not confident about anything," Emerson said. "But that's five whole days we can be working on this and we should be."

The House vote caps a partisan debate on Obama's jobs agenda, which has featured numerous campaign-style appearances but little real bipartisan negotiation, other than Senate talks last week that produced the two-month extension.

The Senate's short-term, lowest-common-denominator approach would renew a 2 percent cut in the Social Security payroll tax, plus jobless benefits averaging about $300 a week for the long-term unemployed, and would prevent a 27 percent cut in Medicare payments to doctors. The $33 billion cost would be financed by a .10 percent increase in home loan guarantee fees charged by mortgage giants Fannie Mae and Freddie Mac, which the administration says would raise the monthly payment on a typical $210,000 loan by about $15 a month.

The House passed a separate plan last week that would have extended the payroll tax cut for one year. But that version also contained spending cuts opposed by Democrats and tighter rules for jobless benefits.

Both the House and Senate bills included a provision designed to force Obama to make a decision on construction of the controversial Keystone XL pipeline, which would deliver up to 700,000 barrels of oil daily from tar sands in Alberta, Canada, to refineries in Texas. The provision requires him to issue the needed permit unless he declares the pipeline would not serve the national interest.

Democrats and the White House had reversed course and accepted GOP demands on Keystone, which contributed to sweeping GOP support for the Senate measure. The White House signaled that Obama would block the project.

Until this weekend, it was assumed that Boehner had signed off on the Senate measure. After all, it was agreed to by Boehner's trusted confidante, Senate GOP Leader Mitch McConnell of Kentucky. Boehner declined on several occasions Friday to reject the idea.

But rank-and-file House Republicans erupted in frustration at the Senate measure, which drops changes to the unemployment insurance system pressed by conservatives, a freeze in the salaries of federal workers and cuts to Obama's health care law.

Also driving their frustration was that the Senate, as it so often does, appeared intent on leaving the House holding the bag -- pressuring House lawmakers to go along with its plan. Tuesday's vote technically puts the onus back on the Senate -- but also invites a full-blown battle with Obama, whose poll numbers have inched up during the battling over his jobs initiative.

Both sides were eager to position themselves as the strongest advocates of the payroll tax cut, with House Republicans accusing the Senate of lollygagging on vacation and Senate Democrats countering that the House was seeking a partisan battle rather than taking the obvious route of approving the stopgap bill to buy more time for negotiations.

"If you say you want to do this for a year, put your vote where your rhetoric is," said Rep. Jeb Hensarling of Texas, a member of the House GOP leadership. "If you're not willing to work over the holidays, admit to the American people that you're not willing to work over the holidays."

"Right now Americans want two things from their Congress: middle class tax relief and compromise," said Rep. Steve Israel of New York, chairman of the House Democrats' fundraising committee. "House Republican partisanship failed on both counts."

Southeast Missourian staff writer Scott Moyers contributed to this report.