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Obama blames Republicans for upcoming tax increase
Obama blames Republicans for tax hike after House rejects 2-month payroll tax cut extension
By The Associated Press

WASHINGTON (AP) ' The House of Representatives Tuesday rejected legislation to extend a payroll tax cut and jobless benefits for two months, drawing a swift rebuke from President Barack Obama that Republicans were threatening higher taxes on 160 million American workers on Jan. 1.

"The clock is ticking, time is running out," Obama said shortly after the House voted 229-193 to request negotiations with the Senate on renewing the payroll tax cuts for a year.

House Speaker John Boehner, told that Obama had sought his help, replied, "I need the president to help out." His voice rose as he said it, and his words were cheered by dozens of Republican lawmakers who have pushed him and the rest of the leadership to pursue a more confrontational strategy with Democrats and the White House in an already contentious year of divided government.

This time, it wasn't a partial government shutdown or even an unprecedented Treasury default that was at stake, but the prospect that payroll taxes would rise on Jan. 1 for 160 million workers and long-term unemployment benefits end for millions of jobless victims of the worst recession since the 1930s.

Yet another deadline has been entangled in the dispute, this one affecting seniors, but the administration announced it had finessed a way around it. Officials said paperwork for doctors who treat elderly patients covered by the government's Medicare program in the early days of the new year will not be processed until Jan. 18, giving lawmakers more time to avert a 27 percent cut in fees threatened for Jan. 1.

Whatever the stakes, there was little indication that House Republicans would get their wish for negotiations with the Senate any time soon. Senate Majority Leader Harry Reid issued a statement saying he would be happy to resume talks on a yearlong measure ' "but not before" the House ratifies the two-month bill and sends it to Obama for his signature.

Given Obama's remarks and Reid's refusal to negotiate, it was unclear what leverage Republicans had in the year-end standoff. It appeared likely the partisan disagreement could easily persist past Christmas and into the last week of the year.

The standoff was sowing confusion for businesses, running out of days to adapt to any new payroll tax regimen. Even the Senate's proposed two-month extension was creating headaches because it contained a two-tiered system geared to ensuring that higher-income earners paid a higher rate on some of their wages, according to a trade group.

"There's not time enough to do that in an orderly fashion," said Pete A. Isberg, president of the National Payroll Reporting Consortium trade group. "We're two weeks away from 2012." He wrote a letter to congressional leaders this week warning that the Senate bill "could create substantial problems, confusion and costs."

Democrats pounced on Republicans for rejecting the Senate bill, emboldened by polls finding Obama's approval rising and that of the congressional Republicans fading. They noted that several lawmakers whom Boehner appointed to negotiate a compromise had recently criticized an extension of payroll tax cuts.

For his part, Boehner sent a letter to the president, noting he had requested a yearlong extension of the tax cut and the House had approved one. "There are still 11 days before the end of the year, and with so many Americans struggling, there is no reason they should be wasted," he wrote, asking Obama to call the Senate back from its year-end vacation.

In his appearance before White House reporters, Obama said Republicans would be to blame for the consequences of a standoff. "Right now, the recovery is fragile, but it is moving in the right direction," he said. "Our failure to do this could have effects not just on families but on the economy as a whole." Obama had requested the extension of the payroll tax cut and unemployment benefits in the fall as part of his jobs program.

As recently as Friday, it appeared a compromise was in sight on the legislation.

After efforts to agree on a yearlong extension sputtered, Senate Republicans and Democrats agreed on the two-month renewal, with the bill's estimated $35 billion cost to be covered by an increased fee on mortgages backed by Fannie Mae and Freddie Mac. That assured deficits wouldn't rise, a key Republican objective.

Republicans also prevailed on their demand to require Obama to decide within 60 days the fate of a proposed Canada-to-Texas oil pipeline that promises thousands of construction jobs. The president's political supporters are divided on the Keystone XL project, with environmentalists generally opposing it and labor unions in favor, and Obama had hoped to avoid making a decision until after the 2012 elections.

The measure quickly cleared the Senate on a vote of 89-10, with 39 of 46 Republicans in favor. Sen. Mitch McConnell of Kentucky, the Republican leader, said he was optimistic the House would go along.

Not so.

On a telephone conference call on Saturday, numerous House Republicans told Boehner and the leadership they opposed the Senate-passed measure and quickly developed their plan ' reject the Senate bill and seek negotiations on a compromise.

At the end of their first year in office, there was no doubt about the ability of dozens of first-term Republicans to flex their muscle.


Associated Press writers David Espo, Ben Feller, Alan Fram, Laurie Kellman, Larry Margasak, Andrew Taylor and Paul Wiseman contributed to this report.

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