US & Canada

US House votes down payroll-tax extension plan

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Media captionPresident Obama appeared frustrated as he walked into a news conference and called on Republicans in Congress to pass the Senate bill

The House of Representatives has rejected a bipartisan plan for a short-term payroll tax break, as Congress ends the year in yet another deadlock.

Republicans demanded immediate negotiations with the Senate on a year-long extension of the measure.

Without an agreement, payroll taxes will rise for 160 million workers from next month.

Unlike other budget battles this year on Capitol Hill, the latest one has exposed Republican divisions.

In the Senate, 39 Republicans voted for the two-month extension rejected by the House on Tuesday and several have disagreed publicly with their counterparts.

The dispute caps a year of partisan confrontations that sent the US to the brink of a first-ever default, prompted a historic credit-rating downgrade, and risked partial shutdowns of the federal government.

In a surprise appearance at a White House press briefing, President Barack Obama told reporters he was calling on Republican representatives to pass the Senate bill.

The president characterised the two-month extension as the only way to prevent a tax rise on 1 January.

"This is not poker, this is not a game, this shouldn't be politics as usual," he said.

In a press conference on Tuesday, Mr Boehner, with almost the entirety of the House Republican conference behind him, said the House had "done its job".

"All we need to do now is resolve our differences," he said.

'Dead on arrival'

The House's vote on Tuesday means the bill will be moved to a conference, designed to bridge differences between House and Senate versions of legislation.

Mr Boehner announced eight Republican House members who would serve as negotiators, and said House Republican leadership would be also be available.

The plan voted down by the House on Tuesday was passed 89-10 by Democrats and Republicans in the Senate over the weekend.

The Senate version extended the payroll tax cut and extended benefits to the long-term unemployed for two months, as well as averting deep cuts in Medicare fees for doctors.

The cost of the bill - $33bn (£21bn) - would have been offset by a 0.1% increase on home loan guarantee fees from Fannie Mae and Freddie Mac.

The House version of the bill, passed on 13 December, would have funded the tax-cut extension a different way.

It included tighter rules for unemployment benefits, blocked certain air pollution rules, and cut more than $20bn in spending under Mr Obama's new health care law.

Senate Democratic Leader Harry Reid called the House version "dead on arrival in the Senate", where the Democrats hold a slim majority.

Both bills included a provision requiring the president to make a decision on the Keystone XL pipeline in 60 days.

A decision on the planned pipeline, designed to bring oil from tar sands in Alberta, Canada to Texas refineries on the Gulf of Mexico, had been pushed back, probably until after the 2012 election.

White House spokesman Jay Carney called the Senate bill "insurance" against a swift tax rise, giving Congress time to work out a full-year extension after the holiday recess.

'Braveheart' Republicans

Mr Reid is rejecting calls for talks from Republicans, who were initially reluctant to extend the tax break, saying the Senate will not return before January.

"I have been trying to negotiate a year-long extension with Republicans for weeks, and I am happy to continue doing so as soon as the House of Representatives passes the bipartisan compromise to protect middle-class families, but not before then," he said on Tuesday.

Senate Republican Leader Mitch McConnell had earlier expressed optimism that the House would approve the deal.

But in closed-door meetings on Monday night, conservative Republicans reportedly rallied against signing on to the Senate compromise.

The lawmakers likened themselves to the rebel Scots in the movie Braveheart, according to the Washington Post.

"We were elected for a reason," freshman Representative Renee Ellmers from North Carolina said on Monday night. "That was because the American people were tired of business as usual."

Mr Obama told reporters on Tuesday that the payroll tax extension had been held up by a "faction" of House Republicans.

Soon after, Mr Boehner called on the president to bring Senate Democrats back to the negotiating table.

If nothing changes by 31 December 2011, annual taxes would go up by about $1,000 (£643) for the average worker.

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