House Republicans agree to two-month payroll tax patch

WASHINGTON -- More than 160 million U.S. workers will pay lower payroll taxes for at least two additional months as part of a deal reached Thursday between House Republicans and Senate leaders.

The deal struck by House Speaker John Boehner and Senate Majority Leader Harry Reid approves a $33 billion extension of the current cut in the tax that pays for Social Security and extends unemployment benefits set to expire Dec. 31. It ends a partisan standoff that had paralyzed Washington at the height of the holiday season.

"Sen. Reid and I have reached an agreement that will ensure taxes do not increase for working families on Jan. 1," Boehner, R-Ohio, said in a brief statement announcing the agreement.

The short-term deal extends the current payroll tax rate at 4.2% from 6.2% and continues to provide unemployment benefits for the long-term unemployed. It also includes a Medicare "doc fix" that will prevent a drop in payments to doctors who treat seniors, and it extends and funds the Temporary Assistance for Needy Families program that provides welfare benefits to 4.6 million Americans.

The deal also includes a provision supported by Republicans regarding construction of the Keystone XL oil pipeline from Canada to Texas that Republicans say will create 20,000 jobs in short order. The White House has said the project needs more time for environmental review, but President Obama will have 60 days to either issue a permit to allow it to be built, or to explain why it is not in the national interest in order to halt it.

By reaching a deal, House Republicans ended five days of increasing tensions that developed after a contentious Saturday conference call in which rank-and-file Republicans rebuffed Boehner's initial efforts to sell them on the Senate deal that passed with bipartisan support on Saturday. After voting down the Senate deal Tuesday, Democrats led by President Obama and a rising chorus of Republicans criticized them for blocking a deal.

The impasse was brokered in part by the Senate's top Republican, Minority Leader Mitch McConnell, R-Ky., who broke with House GOP leaders on Thursday and called on them to approve the short-term patch in exchange for Senate Democrats formally naming negotiators to finalize a full extension through 2012 when Congress returns in January.

"While I am pleased that Senate Democrats and House Republicans have agreed to a solution that recognizes — and resolves — the legitimate concerns on both sides, I think it is crucial for everyone to realize that the larger goal is to move beyond a discussion of temporary assistance once and for all and toward a bipartisan plan to get our economy moving again, reform the tax code, and preserve and protect entitlements," McConnell said in a statement following the deal.

Obama, who had called Boehner on Wednesday and Thursday to urge the deal, applauded the news, saying: "This is the right thing to do to strengthen our families, grow our economy and create new jobs. This is real money that will make a difference in people's lives."

Lawmakers in both parties broadly agree on a one-year benefits extension in principle, but there remain partisan divisions over how to pay for the expected $200 billion cost of a longer term extension. That fight will continue next year.

Boehner informed House Republicans in a conference call Thursday evening of the terms of the agreement. He did not take questions from lawmakers on the call.

House Republicans will now approve the Senate's short-term extension that they had rejected on Tuesday, and Reid, D-Nev., will appoint lawmakers to work on a one-year extension.

"I look forward to appointing members of my caucus to continue negotiations toward a year-long agreement. Two months is not a long time, and I expect the negotiators to work expeditiously to forge year-long extensions of these critical policies," Reid said in a statement in which he thanked "voices of reason" in reaching a compromise.

The new agreement includes language to make it easier for employers to process the tax break, which Senate Democrats agreed to without issue. The House and Senate are likely to approve the extension today by unanimous consent, which means lawmakers will not have to return to Washington.