Congress Approves 2-Month Payroll Tax Cut Extension

[UPDATE] 12/23/11 10:39 a.m.

Congress passed on Friday a two-month extension of the payroll tax cut. The bill, which prevents a 2 percent increase in the payroll tax, now heads to President Obama for his signature.

[This is a breaking news update. Check CP's earlier story below.]

Congress agreed to vote on the Senate’s payroll tax cut extension Friday after Republican leaders and GOP presidential candidates worried about negative sentiment.

Aides alerted The Wall Street Journal that House Speaker John Boehner agreed Thursday evening to allow a vote on the Senate’s plan to extend the payroll tax cut for two months. Under the deal, the tax rate will remain at 4.2 percent on the first $110,100 in wages.

The news is likely a relief for Republicans concerned that Boehner's insistence for a year-long deal would draw voters' ire.

Boehner insisted in a Wednesday phone call with President Barack Obama that both bodies should pass a one-year extension before Christmas and refused the president's suggestion to pass the two-month deal as a temporary fix.

The move caused some presidential candidates to worry that House Republicans had allowed Obama to gain the upper hand in the media. Former Speaker Newt Gingrich said at a Wednesday campaign stop, “He (Obama) has all the advantages of being one person. He has all the advantages of the White House as a backdrop, and my experience is presidents routinely win.”

Fellow contender Jon Huntsman said in a Fox News interview, "I think we are losing the high ground on tax cuts, and I think that's a bad place for the Republican Party to be."

Gingrich advised Boehner to defuse the situation with bipartisanship. “I think what Republicans ought to do is what’s right for America. They ought to do it calmly and pleasantly and happily,” he said.

However, House Republicans continued to hold out on the Senate’s two-month extension until as late as 2 p.m. Thursday afternoon, explaining that the short-term deal leaves Americans with uncertainty. Boehner responded to Republicans’ fears, stating, “Sometimes it’s hard to do the right thing, but we’re doing the right thing.”

President Obama took Republicans’ continued resistance as an opportunity to harp on the party’s failures during a Thursday noontime press conference.

Entering the conference room with a crowd of people, Obama told reporters, “This about the people. It’s not about a contest between politicians.”

While traveling across the country in recent months, Obama criticized Republicans who signed a pledge not to increase taxes but were refusing to pass a tax cut.

Although the president’s approval rating is currently below 50 percent (at 49 percent), the congressional approval rating is far worse (11 percent).

The fear is that Obama will use a weak Congress to disparage Republicans and bolster his own image in the media ahead of his re-election bid.

Gingrich acknowledged this possibility Wednesday, saying, “Incumbent presidents have enormous advantages.”

However, Republican candidate Michele Bachmann argued that continuing the payroll tax cut is a disadvantage for the president because the Senate and House have not agreed on how to pay for the cut. Additionally, the Senate's two-month plan pays for the tax cut with a cut in Social Security benefits.

“There isn’t one shred of evidence that that [the payroll tax cut] created jobs," Bachmann said Sunday on NBC's “Meet the Press.” "It defeated its purpose, plus it put senior citizens at risk by denying the $111 billion to the Social Security Trust Fund. All it’s doing is adding to the debt.”

Mitt Romney said the president was once again not being a leader in this situation. He also expressed some support of the House’s efforts.

“Two months is not very long," he told MSNBC. "You'd like to get as much done as possible; you'd like to see it go a full year."

Gingrich, meanwhile, urged Republicans to make a deal.

When House Republicans refused to do so, Senate Minority Leader Mitch McConnell (R-Ky.) urged them to consider the two-month extension in exchange for immediate Senate negotiations on a one-year tax cut deal.

Boehner's aides confirmed that he accepted the compromise. The House plan will also include a provision that will allow business owners to process the two-month tax cut without upgrading their current accounting systems.

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