House GOP gives in on short-term tax cut

WASHINGTON -- Their isolation complete, House Republicans Thursday caved to demands by President Barack Obama, congressional Democrats and fellow Republicans for a short-term renewal of payroll tax cuts for all workers.

After days of wrangling that even House Speaker John Boehner (R-Ohio) acknowledged "may not have been politically the smartest thing in the world," he abruptly changed course and dropped demands for immediate holiday season talks with the Senate.

The breakthrough probably spares workers a hit in their paychecks that would have kicked in Jan. 1.

The House and Senate plan to act on the two-month extension Friday. It would renew the tax break while congressional negotiators work out a longer-term measure. The tax cut bill would also extend jobless benefits for millions of Americans and prevent doctors from absorbing a big cut in Medicare payments. The $33 billion cost would be covered by an increased fee on mortgages backed by Fannie Mae, and Freddie Mac.

The developments were a clear win for Obama. The payroll tax cut was the centerpiece of his three-month campaign-style drive for jobs legislation.

"Because of this agreement, every working American will keep his or her tax cut -- about $1,000 for the average family," Obama said. "That's about $40 in every paycheck. And when Congress returns, I urge them to keep working to reach an agreement that will extend this tax cut and unemployment insurance for all of 2012 without drama or delay."

The GOP retreat ends a tense standoff in which Boehner's House Republicans came under great pressure to agree to the short-term extension passed overwhelmingly by the Senate on Saturday. The speaker was open to the idea, but harder-line Republicans revolted and he instead insisted on immediate talks.

Just hours before he announced the breakthrough, Boehner had made the case again for a yearlong extension. But the top Republican in the Senate, Mitch McConnell of Kentucky, instead urged the House to accept the outlines of the Senate legislation. Resolve was crumbling among tea party-backed Republicans, too.

"An 'all or nothing' attitude is not what my constituents need now," Rep. Rick Crawford (R-Ark.) wrote to Boehner.

After the deal was announced, Sen. Charles Schumer (D-N.Y.) said: "In a year of divided government taken too far, Congress is thankfully going out on a bipartisan note. This is a victory for middle-class taxpayers over tea party politics."

"Credit for the Republican reversal goes to the middle class who expressed outrage all across the country," added Rep. Steve Israel (D-Dix Hills). "Now we need to make sure we get a one-year extension of a middle class tax cut that is not paid for by the middle class."