U.S. leaders say they are hard at work on payroll tax

Reporting from Washington —  With no endgame in sight to prevent a looming payroll tax hike, President Obama and congressional leaders took turns trying to convince Americans that they were hard at work to save the tax break — even though Congress has essentially closed for the holidays.

Obama called House Speaker John A. Boehner (R-Ohio) on Wednesday to nudge him to compromise. Boehner assembled his top negotiators but, with no one to negotiate with, they talked among themselves. House Democratic leaders staged a lonely protest on the empty House floor, shouting for the chance to bring a bipartisan tax break bill to a vote.

Away from the antics, ways out of the stalemate were being debated. House Republicans found themselves increasingly isolated from the rest of their party over their resistance to a two-month, stopgap measure that would extend the tax break for 160 million working Americans. Back-channel talks continued.

“The compromise exists,” said White House spokesman Jay Carney. “They should just get it done.”

Boehner couldn’t agree more, and told the president as much when Obama called, an aide recounted.

“Let’s get this done today,” the speaker told Obama.

But finding consensus is easier said than done. Republicans and Democrats remain at odds over how to pay for the legislation, which would cost $200 billion for a full year. The package would extend the 2-percentage-point reduction on the payroll tax workers contribute to Social Security that has been in place all year and that expires Dec. 31. It also would continue unemployment insurance for 3 million jobless Americans and shield doctors who treat Medicare patients from a 20% pay cut.

Because lawmakers were unable to agree on how to fund the full-year package, the Senate overwhelmingly approved the two-month compromise to provide more negotiating time. But the GOP-led House rebuffed that deal. Rank-and-file members, who have been cool to the tax break, now say the stopgap measure is insufficient and want a one-year package — but one that differs sharply from the Senate approach.

The standoff puts in doubt whether the tax break — which adds an average $20 a week to paychecks — will be extended into 2012.

The one figure not playing a public role in the standoff was Sen. Mitch McConnell of Kentucky, the GOP leader, who was an architect of the stopgap compromise. McConnell, at home in Louisville, has been in touch with Boehner and could help orchestrate a way out of the stalemate.

One strategy would be for the House to approve the temporary measure while talks continue, but aides downplayed that possibility. Some in the GOP have said they have until Jan. 3 to reach a deal, knowing the tax cut could be made retroactive.

Democrats are hesitant to reenter formal talks with the House GOP until the stopgap measure is approved. They doubt that Republicans really want to extend the tax cut and worry they will try to extract further concessions in exchange for votes.

As each side waits for the other to blink, they are calculating who will take the blame if taxes rise. So far, House Republicans have endured heavy criticism, even from allies, for rejecting the Senate deal — which passed by a bipartisan 89-10 vote — and for tarnishing the GOP’s reputation as the party of low taxes.

The Wall Street Journal editorial board called the GOP strategy a fiasco, arguing that it allowed the president to look like a tax-cutter. Sen. John McCain (R-Ariz.) tweeted that the editorial was “right on the mark.”

“I’m amazed by how badly this payroll tax cut is being mishandled,” said Ron Nehring, chairman emeritus of the California Republican Party, in a tweet. “Let’s extend it a year, throw in a new pipeline” — a reference to a provision that would expedite a decision on the controversial Keystone XL project — “and call it a day.”

Boehner answered critics Wednesday during a photo opportunity with his negotiators. Republicans sat on one side of a conference table, facing empty chairs supposedly set out for Democrats.

“We are the party of lower taxes for the American people,” Boehner said. “We have fought for lower taxes for the 21 years that I’ve been in this Congress, and we are going to continue to be the party of lower taxes.”

House Democrats, meanwhile, have launched a campaign to target Republican lawmakers at home for rejecting the Senate compromise.

Rep. Steny H. Hoyer of Maryland, the minority whip, tried to bring the Senate bill up for a vote during a pro forma session in an empty Capitol. But the GOP representative in the speaker’s chair, Rep. Michael G. Fitzpatrick (R-Pa.), gaveled business to a close.

Boehner was planning another meeting with negotiators Thursday.

Christi Parsons in the Washington bureau contributed to this report.

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