Senate rejects, for now, payroll tax cuts

The Senate on Thursday sidetracked rival plans to extend a Social Security payroll tax cut, in dueling votes that pave the way for negotiations on a compromise on a core component of President Barack Obama's jobs program.

First, 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.

Minutes later, in a vote that exposed rare divisions among Senate Republicans, more than two dozen of the GOP's 47 lawmakers also voted to kill an alternative plan backed by their powerful leader, Mitch McConnell of Kentucky, to renew an existing 2 percentage point payroll tax cut.

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

The defeat of the competing plans came as House Speaker John Boehner, (R-Ohio), said for the first time that renewing the payroll tax cut would boost the lagging economy, a view many in his party don't share. Boehner also promised compromise on a renewal of long-term jobless benefits through the end of 2012.

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.

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.