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Next moves unclear on payroll tax cut extension

By Andrew Taylor

Associated Press

Published: Friday, Dec. 2 2011 12:00 p.m. MST

Senate Majority Leader Harry Reid of Nev. speaks to reporters about extending the payroll tax cut, Thursday, Dec. 1, 2011, on Capitol Hill in Washington.

Charles Dharapak, Associated Press

Enlarge photo»

WASHINGTON — House GOP leaders struggled Friday with divisions within their party over whether to extend a payroll tax cut, a day after the Senate stalled in its efforts to keep the tax holiday going another year.

Senate votes Thursday exposed wide reluctance by Republicans to go along with the costly proposal that's a centerpiece of President Barack Obama's jobs agenda. That puts the focus on the GOP-controlled House.

The cut in Social Security payroll taxes encountered stiff opposition from many House Republicans in a closed-door meeting on Friday, and it seemed plain that Republican leaders like House Speaker John Boehner have a lot of persuading to do before the payroll tax measure and an accompanying extension of unemployment benefits is ready for a vote.

Rep. Louie Gohmert, R-Texas, said the current 2 percentage point cut in the Social Security payroll tax hasn't helped. Extending the tax holiday for another year would cost $120 billion.

"It hasn't stimulated the economy at all," Gohmert said. "But over the long term, it does add to our deficit."

With just two or three weeks before Congress adjourns for the holidays, Republicans are deeply unhappy with a year-end agenda populated with Obama initiatives like the payroll tax cut and jobless benefits, as well as a nearly $1 trillion stack of unfinished spending bills.

"We need to get this done," Obama said Friday, speaking about the payroll tax cut. "And I expect that it's going to get done before Congress leaves. Otherwise Congress may not be leaving, and we can all spend Christmas here together."

"There's not a hell of a lot of enthusiasm for anything right now," said Rep. Ralph Hall, R-Texas.

On Thursday, as expected, Senate Republicans defeated Obama's plan to extend the payroll tax cut through the end of next year while also making it more generous for workers.

But in a vote that exposed rare divisions among Senate Republicans, more than half of GOP lawmakers also voted to kill an alternative plan backed by their leader, Mitch McConnell, R-Ky., to renew the existing 2 percentage point payroll tax cut.

A spokesman for Boehner, R-Ohio, said House Republicans weren't planning on negotiating with Democrats before unveiling a payroll tax cut plan — and the spending cuts to pay for it — next week. But the Senate vote would seem to indicate that House Republicans will be hard-pressed to muscle a payroll tax cut through without Democratic support. And those votes could be hard to come by if the GOP plan contains spending cuts Democrats dislike.

Many Republicans and even some Democrats say the payroll tax cut hasn't worked to boost jobs and is too costly at a time when the deficit requires the government to borrow 36 cents of every dollar it spends.

"I can't find many people who even know that they're getting it, OK?" said Sen. Joe Manchin, D-W.Va., who opposed both tax cut plans. "So with that being said, we're going to double down on something that we thought should have worked that didn't work."

The defeat of the competing Senate plans came as Boehner said for the first time that renewing the payroll tax cut would boost the lagging economy. Boehner also promised compromise on a renewal of long-term jobless benefits through the end of next year.

The payroll tax cuts and unemployment benefits are at the center of a costly, politically-charged year-end agenda in which Democrats seem poised to prevail in renewing a tax cut that many Republicans back only reluctantly. But Republicans are insisting — in a switch from last year — that the payroll tax cut and jobless benefits be paid for by cutting spending.

Boehner also wants to provide doctors two years of relief from huge cuts in Medicare payments and attach legislation to speed the construction of the controversial Keystone oil pipeline.

Both parties are seeking the political high ground as next year's elections loom, with Democrats accusing Republicans of siding with the rich, and Republicans countering that Democrats were taxing small business owners who create jobs.

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