House rejects payroll-tax deal. Is it now dead?

The House rejected the Senate's temporary payroll-tax deal Tuesday, leaving no clear way out of the impasse. The House wants more discussions, but the Senate says it's done talking.

Forget lines in the sand. Congress is breaking out the shovels.

With Tuesday’s near party-line House vote, the House and Senate are at an impasse over how to continue payroll-tax breaks and other expiring measures – and there’s no obvious way out.

If Congress fails to act:

• 160 million Americans will see a payroll tax hike averaging $1,000 for each taxpayer.
• 2.5 million jobless workers will lose unemployment benefits.
• Doctors serving Medicare patients will face a 27.4 percent drop in federal reimbursements.

The Senate on Saturday appeared to have settled the issue with a big, bipartisan vote to extend these expiring measures for two months, 89 to 10. Senators on both sides of the aisle left Washington declaring victory.

Tuesday’s House vote to reject the Senate bill, 229 to 193, revived the impasse. The next step is a conference between House and Senate negotiators to resolve differences between the Senate bill and a House bill the Senate rejected.  

The differences are significant. The House bill extends a pay freeze for all federal workers, cuts unemployment benefits over time from 99 weeks to 54 weeks, reverses an Obama-era rule that bars states from requiring drug tests of jobless applicants, and delays pollution regulations for industrial boilers.

But the Senate has left town and is not scheduled to return until Jan. 23. Moreover, the holidays are a prime time for traveling congressional delegations, especially visits to the troops, meaning they are hard to cut short.

President Obama called on House Speaker John Boehner (R) of Ohio to “put politics aside,” reverse course, and bring the Senate bill back to the floor for an up-or-down vote.

House GOP leaders did not structure today’s vote as up-or-down on the Senate bill. Lawmakers had the option to vote “yes” or “no” on rejecting the Senate bill and going to conference. They did not have the option of supporting the Senate bill.  

If they had, Democrats would have needed 26 Republicans to break ranks in support of the bill and send it to the Oval Office for the president’s signature.

“Our failure to do this could have effects not just on families but on the economy as a whole,” President Obama told reporters at a surprise White House briefing after the House vote.

In response, Mr. Boehner called on the president to “show real leadership” and pressure Senate Democrats to return to Washington to negotiate a new bill before these measures expire on Jan. 1.

"There's no reason we can't solve this in short order," he said at a press briefing after the vote. "Our negotiators are here, ready, and able to work.”

After Tuesday’s vote, Boehner named eight House Republicans to serve on the proposed conference committee, which may never meet. House GOP leaders and conferees plan to be available in Washington through the holidays.   

“Why would people go on their vacations when we have such an important bill left to resolve for the American people?” says Rep. Kevin Brady (R) of Texas, vice chair of the Joint Economic Committee and one of the conferees on the proposed new panel.

But Senate Democrats are standing their ground. Senate majority leader Harry Reid (D) of Nevada says he will not call the Senate back into session or even appoint conferees to meet with the House. Nothing happens until the House agrees to take the Senate bill back to the floor for an up-or-down vote, he says.

The wildcard is how constituents, polls, and the markets respond to gridlock on Capitol Hill and uncertainty over whether these measures will be renewed in time. Both sides are counting on the other to cave to a negative public reaction.  

If past fiscal crises are any indication, this standoff could go down to the wire. 

“It’s hard to see how Republicans move from this,” says Stan Collender, a longtime federal budget analyst now with Qorvis Communications in Washington. “But a lot of people expect that it will be like every budget fight this year and go down to the very, very, very last minute.”