Obama scolds Republicans as tax bill is rejected

REUTERS - U.S. President Barack Obama on Tuesday demanded that Republicans in the House of Representatives quickly pass a short-term extention of a payroll tax cut, showing an unwillingness to back down in a fight that could result in higher taxes for 160 million American workers.

The Republican-led House rejected a short-term deal passed by Democrats and fellow Republicans in the Senate and called for fresh negotiations on the expiring tax break that saves the average American worker $1,000 a year.

But Harry Reid, leader of the Democratic-controlled Senate, insisted he would not recall the chamber to reopen negotiations. Reid has won backing from some Republicans in the Senate who have called on their colleagues in the House to back the deal.

Obama told lawmakers to put politics aside and said “let’s not play brinkmanship.”

“The clock is ticking. Time is running out. And if the House Republicans refuse to vote for the Senate bill or even allow it to come up for a vote, taxes will go up in 11 days,” Obama told reporters in a surprise visit to the White House Briefing room shortly after the House vote.

Both parties believe they have the upper hand in the year-end battle. Republicans are betting that Democrats fear a voter backlash in 2012 if the tax break expires and will eventually bow to their demands. Democrats, however, are gambling that the same is true for Republicans.

'Let's not play brinkmanship'

Republicans say they want to negotiate for a full year extension, not just the two month stop-gap measure approved by the Senate. The Senate passed the shorter extension because it could not agree on a longer-term deal.

Failure to extend the tax break and benefits for millions of unemployed Americans, which expire on Dec. 31, could heighten the possibility of a U.S. recession in 2012, some economists have warned.

The U.S. Treasury Department issued a statement countering Republican arguments that a two-month extension in the tax cuts would not be feasible. It said while a full-year extension of the payroll cut would be the preferable, it could implement a shorter-term extension.

With both parties appearing unwilling to compromise, lawmakers spent most of the day accusing each other of brinkmanship.

Many had anticipated that the year-end negotiations on renewing the tax break would be difficult, but what had been expected to be a brawl has exploded into a full-scale battle.

Washington gridlock and dysfunction is fueling an anti-incumbent mood among voters heading into next year’s elections, with Congress’ popularity at a low of 11 percent.

Economists fear that if the tax break is allowed to expire that could dampen economic growth as the United States struggles to right itself after the deepest recession in decades and severe debt problems in Europe that could infect America.