kcentv.com - KCEN HD - Waco, Temple, and KilleenObama, GOP Maneuver On Payroll Tax Cut

Washington (CNN) -- President Barack Obama stepped up his push Tuesday to get Congress to extend the payroll tax cut for the rest of the year, arguing that a failure to do so could derail the economic recovery.

"This is a make-or-break moment for the middle class," Obama said at the White House. "The last thing we need is for Washington to stand in the way of America's comeback."

The president urged the public to pressure members of Congress not to "let up until this thing gets done." This is "the least of what we should be doing for working Americans," he said.

Obama's remarks came one day after House GOP leaders dropped their demand that any extension be offset by spending cuts elsewhere in the budget. The decision was a sharp turnaround for House Republicans, who previously argued that a failure to fully pay for the tax break would be financially reckless.

Democrats immediately welcomed the GOP reversal. One Democratic aide familiar with the negotiations called it a "major breakthrough."

The payroll tax cut, a key part of Obama's economic recovery plan, has reduced how much 160 million American workers pay into Social Security on their first $110,100 in wages. Instead of paying in 6.2%, they've been paying 4.2% for the past year and two months. The break, currently scheduled to expire at the end of February, is worth about $83 a month for someone making $50,000.

The debate over whether and how to extend the tax cut has been a political loser so far for the Republicans, who publicly questioned its value last year. Democrats have gleefully highlighted the GOP's reluctance, using the issue to portray Republicans as defenders of rich who are indifferent to the plight of the middle class.

Political analysts also believe the showdown over the payroll holiday has eroded GOP strength on the party's core issue of lower taxes. Fearing they were being outmaneuvered, Republican leaders dropped their opposition to a two-month extension of the break last December.

"I think the GOP has read the writing on the wall when it comes to the payroll tax cut," said Brown University political scientist Wendy Schiller. "Americans are benefiting from it, and to take it away at this juncture leaves them open to charges of raising taxes. ... It would severely hamper the GOP presidential nominee's effort to defeat Obama."

Johns Hopkins University political scientist Adam Sheingate called the GOP's move "a subtle shift in strategy precipitated by the improving economic outlook of the past few weeks."

"By agreeing to a deal, the GOP can claim some credit for extending the holiday," Sheingate said. "Failing to extend the payroll tax would not only be unpopular, it would shift some of the responsibility for the economy back on the Republicans. This is to be avoided at all costs since the GOP (election) strategy rests almost entirely on Obama's handling of the economy."

Speaker John Boehner, R-Ohio, and two other top House GOP leaders released a statement Monday expressing a desire to separate the payroll tax cut extension from legislation extending unemployment benefits and preventing a fee cut to Medicare doctors -- known in Washington as the "doc fix."

Doing so would "protect small businesses and our economy from the consequences of Washington Democrats' political games," said Boehner, House Majority Leader Eric Cantor, R-Virginia, and House Majority Whip Kevin McCarthy, R-California.

"Unfortunately, to date, Democrats have refused virtually every spending cut proposed -- insisting on job-threatening tax hikes on small businesses and job creators -- and with respect to the need for an extension of the payroll tax cut, time is running short," they argued.

Schiller told CNN the strategy of divorcing the payroll tax cut from the unemployment benefits extension and the doc fix is "a clever strategy by the House GOP leadership."

Doing so "immediately removes the (Democrats') leverage on the other issues of unemployment and Medicare payments," she said. "Also, as the unemployment numbers get better, the rationale for a lengthy extension of benefits diminishes. The longer the GOP can stall on the unemployment extension, the more likely it is they win in terms of authorizing a much shorter extension than the Democrats would like."

It remains unclear however, if the increasingly conservative House GOP caucus will agree to Boehner's strategy. House Republican freshmen, elected on a tidal wave of tea party support in 2010, have made deficit reduction their top priority and repeatedly insisted that any new initiatives be fully paid for.

In the past, House GOP leaders have often struggled to get rank-and-file conservative members to go along with their decisions on spending issues -- particularly when related to negotiations with Democrats. The fact that all three leaders issued Monday's statement was seen by aides in both parties as a sign that they expect to be able to pass the bill without conservatives who might break with the leadership.

House Republicans will meet in closed session Tuesday to discuss the proposal, which could be voted on in the House by the end of the week, the leaders said.

Aides in both parties said Monday they expect negotiations to continue on both the doc fix and the unemployment benefit extension. They also said removing the payroll issue from those talks should make it easier to reach agreement on them.

Those talks would include potential cost offsets for the payroll tax cut extension even if it has already passed, the GOP leaders said in their statement.

White House Press Secretary Jay Carney insisted Monday there is time for Congress to work out a comprehensive agreement that would extend both the payroll tax cut and unemployment insurance. Carney stopped short, however, of saying Obama would oppose the House proposal to separate the payroll tax provision from the other issues under negotiation.

"This is a hypothetical proposal put out that they said they might do if conversations with folks on Capitol Hill don't progress according to the way they want," Carney told reporters.

"Let's just see how this process plays out. Extending unemployment insurance as well as the so-called doc fix is equally important -- certainly very important, and very important for our economy. So the president supports extending all of it, and doing it in a way that is easily achievable if folks put ideological and partisan positions aside."

While Obama stressed the need to extend unemployment benefits in his remarks Tuesday, he did not explicitly tie the issue to a payroll tax cut extension.

The president did not include any mention of the doc fix.