House Republicans Cave on Payroll Tax Cut Extension

A muted House Speaker John Boehner announced Thursday that Republicans have decided to accept a short-term extension of the payroll tax cut, preventing a hike in taxes just nine days before the tax break expires for 160 million Americans.

House GOP leaders appeared to be adopting a compromise suggested by Senate Minority Leader Mitch McConnell to pass the two-month extension in exchange for the Senate appointing members to a conference committee, which will negotiate a longer-term solution. The proposal won a nod of approval from President Obama and Senate Majority Leader Harry Reid.

But Boehner was visibly unhappy with the deal.

"Kicking a can down the road for a couple of months does cause problems," he said at a news conference.

House Republicans had originally wanted a one-year extension but faced mounting pressure from conservatives and their Senate counterparts to come to an agreement on the short-term deal.

"Sometimes it's politically difficult to do the right thing," Boehner said.

He admitted that the House Republicans' refusal to compromise on the short-term extension, which received backlash even from conservatives, politically "may not be the smartest thing in this world... but our members waged a good fight."

The deal entails a new bill with language protecting small businesses from a measure in the Senate bill that creates temporary new caps on the wages that are subject to payroll tax relief, a Republican aide said. Reid accepted the House Republicans' proposal late this afternoon.

The bill is scheduled to be passed by unanimous consent Friday, which would not require all the members to return for a vote.

Obama hailed the agreement and congratulated Congress members "for ending the partisan stalemate," but he also urged Congress to extend the payroll tax cut for the full year in 2012 "without drama or delay."

Earlier Thusday afternoon, Obama assailed House Republicans for a "ridiculous Washington standoff" and stepped up pressure on them to pass a two-month extension bill that sailed through the Senate by a bipartisan vote.

"This isn't a typical Democrat versus Republican issue. This is an issue where an overwhelming number of people in both parties agree," the president said. "How can we not get that done? Has this place become so dysfunctional that even when people agree to things, we can't do it? It doesn't make any sense."

The president, who delayed his vacation to Hawaii with his family because of the stalemate, was surrounded by individuals who wrote to the White House detailing how the end of the payroll tax break would affect their lives.

The White House pursued an aggressive campaign on social media to highlight the loss in benefits that millions of Americans will incur on Jan. 1 if Congress doesn't act. Americans, on average, would lose about $40 per paycheck if the tax cuts expire. On Wednesday, Obama himself personally took to Twitter asking Americans to share what that loss would mean to them.

"Forty dollars can make all the difference in the world," Obama said Thursday, as he read out stories from Americans who had responded to his request. "Enough is enough. The people standing with me today cannot afford any more games."

Obama said more than 30,000 people have responded to the White House's "What 40 Dollars a Paycheck Means to American Families" campaign on Twitter, Facebook and whitehouse.gov.

House Republicans faced increasing pressure, even from their Senate counterparts, to find a compromise quickly. Outwardly, the House GOP leadership showed no outward sign of caving in, reiterating defiantly that they would not support the Senate bill.

But internally, even rank and file House Republicans were beginning to break away from Boehner and the GOP leadership's insistence that Congress approve a year-long deal to extend the payroll tax cut, instead urging the speaker to consider a short-term deal.

Rep. Sean Duffy, a freshman Republican from Wisconsin, called on his leadership "to immediately bring up the Senate's two-month extension for an up or down vote."

"Middle class families deserve a Congress that will rise above the squabbling and ensure their taxes don't go up right after Christmas," Duffy wrote in a statement. "This is about preventing hardworking Wisconsin families from paying an extra $40 a week for the dysfunction in Washington, D.C."

Another House Republican freshman, Rep. Rick Crawford of Arkansas, wrote a letter to the speaker that asked for all options to be on the table as time runs short.

All week long, conservatives ranging from Sen. John McCain, R-Ariz., to Karl Rove took shots at Boehner and the House GOP for holding out for a long-term extension.

"There's no doubt this hurts the Republican Party, and that bothers me a great deal, as a Republican," Sen. John McCain, R-Ariz., said on CBS News Thursday morning, adding that he feels bad for American taxpayers who are "innocent bystanders caught in the crossfire."

"This is really tragic for the American people. And I would say that next November, no incumbent is safe, nor should they be," McCain said.

Senior Democrats, meanwhile, pounced on Republicans for not agreeing to the two-month extension.

"Republicans have been arguing about process and politics," House Minority Whip Steny Hoyer said. "The stakes are too high to be arguing about politics and process. The Republican contention that the two-month compromise somehow is unworkable is simply untrue."

If the payroll tax cut was not extended, 160 million American workers would have seen a 2 percentage point raise in their taxes, starting Jan. 1, raising the overall tax burden to 6.2 percent. Three million people who are receiving long-term unemployment benefits would also have seen their benefits drop. The gridlock would also impact Medicare, which would likely lower reimbursements to doctors.

The payroll tax cuts, passed by George W. Bush's administrations are popular on both sides of the political aisle. Washington experienced a similar gridlock in 2010 when the time came to renew the cuts.

Meanwhile, 2012 Republican presidential contenders expressed mixed views on the payroll tax extension debate.

Former Massachusetts Gov. Mitt Romney on Wednesday skirted the question of whether he supported Boehner's decision to reject the Senate bill, only saying, "My own view is had I been president, I would have been working with the leaders in both parties to see if there's not a way to reach common ground. My assessment of the circumstances is that there is common ground to reach in this matter. This should have been dealt with some time ago."

Newt Gingrich, however, took a widely different approach. Going into what appeared to be Speaker mode, the former Speaker jumped to give his Republican counterparts in the House some advice.

"Incumbent presidents have enormous advantages. And I think what Republicans ought to do is what's right for America," Gingrich said. "They ought to do it calmly and pleasantly and happily."

In a not-so-veiled jab against Romney, Gingrich said that a candidate running for president ought not to run away from the issue.

"There's a concept called leadership," he said. "We need real leaders who have the courage to say what they really think. This is a mess. Washington's a mess. ... Think about how this muddle looks around the world. We can't even pass a tax cut?"

Conservatives had lashed out at House Republicans for creating a "fiasco" that put the party in a negative light and virtually hands over the win to Obama and Democrats.

"The GOP leaders have somehow managed the remarkable feat of being blamed for opposing a one-year extension of a tax holiday that they are surely going to pass. This is no easy double play," the Wall Street Journal stated in an editorial Wednesday. "Republicans have also achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter, although he's spent most of his presidency promoting tax increases and he would hit the economy with one of the largest tax increases ever in 2013. This should be impossible."

In an election year, a deadlock such as this could have significant negative consequences.

"Through all this analysis of the fiasco, there is a sense of doom for the Republican House. They have gone out on an ice floe with no obvious way back to shore," wrote conservative radio talk show host John Batchelor. "There is a strong possibility that President Obama will nurse the grievance against the Republican Party, and the Tea Party particularly, until the State of the Union."

ABC News' Jonathan Karl, Ann Compton and Amy Walter contributed to this report.