WASHINGTON (AP) - The House Tuesday rejected a plan backed by President Barack Obama that would have extended a 2-percent payroll tax cut for two months and bought time for talks on a full-year renewal.
Republicans controlling the chamber are instead demanding immediate negotiations with the Senate on a year-long plan.
If Congress doesn't pass a bill by the end of the year, payroll taxes will go up for 160 million workers on Jan. 1. Almost 2 million people could lose unemployment benefits in January as well.
For some people, the prospect of receiving smaller paychecks is already influencing holiday spending habits.
Sonja Oliver took her son and grandson Christmas shopping at the Potomac Yard shopping center in Arlington.
She and others did not like the idea of their taxes going up right after spending a lot on gifts.
"There's less and less that you can put toward things that are important, like family and expenses," Oliver said.
The House vote, 229-193, kicks the measure back to the Senate, where the bipartisan two-month measure passed on Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid, D-Nev., says he won't allow bargaining until the House approves the Senate's short-term measure.
The vote caps a partisan debate on Obama's jobs agenda, which has featured numerous campaign-style appearances but little real bipartisan negotiation, other than Senate talks last week that produced the two-month extension.
In a surprise appearance in the White House briefing room on Tuesday, the president said a "faction" of Republicans in the House is refusing to vote on a Senate bill that would extend a payroll tax cut for two months.
Obama said, "The clock is ticking. Time is running out."
The president said House Republicans are trying to "wring concessions" from Democrats on issues that "have nothing to do with the payroll tax cut."
Obama says lawmakers owe it to the American people "to come together and do the right thing."
The Senate's short-term, lowest-common-denominator approach would renew a 2 percentage point cut in the Social Security payroll tax, plus jobless benefits averaging about $300 a week for the long-term unemployed, and would prevent a 27 percent cut in Medicare payments to doctors.
The $33 billion cost would be financed by a .10 percentage point hike in home loan guarantee fees charged by mortgage giants Fannie Mae and Freddie Mac, which the administration says would raise the monthly payment on a typical $210,000 loan by about $15 a month.
The House passed a separate plan last week that would have extended the payroll tax cut for one year. But that version also contained spending cuts opposed by Democrats and tighter rules for jobless benefits.
Both the House and Senate bills included a provision designed to force Obama to make a decision on construction of the controversial Keystone XL pipeline, which would deliver up to 700,000 barrels of oil daily from tar sands in Alberta, Canada, to refineries in Texas.
The provision requires him to issue the needed permit unless he declares the pipeline would not serve the national interest.
Democrats and the White House had reversed course and accepted GOP demands on Keystone, which contributed to sweeping GOP support for the Senate measure. The White House signaled that Obama would block the project.
Until this weekend, it was assumed that House Speaker John Boehner, R-Ohio, had signed off on the Senate measure. After all, it was agreed to by Boehner's trusted confidante, Senate GOP Leader Mitch McConnell of Kentucky. Boehner declined on several occasions Friday to reject the idea.
But rank-and-file House Republicans erupted in frustration at the Senate measure, which drops changes to the unemployment insurance system pressed by conservatives, along with cuts to President Barack Obama's health care law.
Also driving their frustration was that the Senate, as it so often does, appeared intent on leaving the House holding the bag - pressuring House lawmakers to go along with its plan.
Both sides were eager to position themselves as the strongest advocates of the payroll tax cut, with House Republicans accusing the Senate of lollygagging on vacation and Senate Democrats countering that the House was seeking a partisan battle rather than taking the obvious route of approving the stopgap bill to buy more time for negotiations.
"If you say you want to do this for a year, put your vote where your rhetoric is," said Rep. Jeb Hensarling of Texas, a member of the House GOP leadership. "If you're not willing to work over the holidays, admit to the American people that you're not willing to work over the holidays."
"Right now Americans want two things from their Congress: middle class tax relief and compromise," said Rep. Steve Israel of New York, chairman of the House Democrats' fundraising committee. "House Republican partisanship failed on both counts."