Obama to Congress: Don't leave without action on payroll

President Barack Obama outlines his fiscal policy during an address at George Washington University in Washington, Wednesday, April 13, 2011.
AP Photo/Charles Dharapak

Updated: 1:52 p.m. ET

President Obama on Thursday warned Congress not to "leave town" until they had extended payroll tax cuts and unemployment insurance, telling reporters that "there's no reason why we shouldn't be able to extend these items...before the holidays. There's no reason the government should shut down over this."

"This Congress cannot and should not leave for vacation until they have made sure that that tax increase doesn't happen," Mr. Obama said, during remarks regarding the Home Care Rule. "I expect all of us will do what's necessary in order to do the people's business and make sure that it's done before the end of the year."

In a fitting coda to a contentious year in Washington, Congress once again finds itself threatening government shutdown just days before deadlines for passing two major pieces of legislation.

Despite weeks of debate over a bill for extending payroll tax cuts - something leaders in both parties back - Democratic and Republican lawmakers find themselves in a stalemate over how to pay for the $180 billion legislation, which would allow 160 million workers to continue to benefit from the tax cut for another year. Currently, the payroll tax cut expires on January 1.

The House on Tuesday passed a bill that extended the tax cut as well as long-term unemployment benefits.

But the House bill pays for the legislation by extending the current federal worker pay freeze one more year, requiring federal workers to contribute more to their pensions, and charging higher insurance rates for Fannie Mae and Freddie Mac mortgages. It would also prevent millionaires from collecting unemployment benefits or food stamps and increase Medicare Part B and D premiums for high-income earners.

Democrats had demanded that the bill be paid or by raising taxes on Americans earning more than $1 million a year, and they rejected the House bill.

The House bill was set to be voted down in the Democrat-majority Senate Wednesday morning, but Republicans blocked a vote on the legislation, contending that a trillion-dollar omnibus spending bill to fund the government should take priority. If that bill is not passed by Friday night, when a short-term budget bill expires, the government faces shutdown.

Democrats have sought to prevent passage on the spending bill amid fears that if the government is funded, Republican lawmakers will leave town for the holidays before voting on the payroll tax cut bill.

In a Wednesday night statement, White House Communications Director Dan Pfeiffer argued that "given the magnitude of the legislation -- providing over $1 trillion dollars in funding -- coupled with the unresolved payroll tax cut and unemployment insurance extension," Congress should pass another short-term spending bill "so that all parties have an appropriate opportunity to consider and complete all of the critical budget and economic issues necessary to finish our responsibilities for the year."

Late last night, House Republicans introduced a package designed to allow them to pass a spending bill on their own despite efforts by some Democrats to slow the process.

On the Senate floor Thursday morning, Senate Minority Leader Harry Reid, D-Nev., seemed to suggest Democrats were open to proceeding with a conference spending bill previously brokered between the two parties. Reid said there were "a few issues still outstanding with the bill" but they were "really small in number" and likely "resolvable." 

"There are a couple issues we have to still work out with the House but I'm in -- White House -- but I'm in touch with them also," he added.

A House GOP leadership aide told CBS News that Republicans would like Senate Democrats to sign the appropriations conference report so that the House can pass it tomorrow. The aide says the language that the House posted last night is the same as what is in the conference report and that he House could pass the bill, leave town while the Senate finds a way to pass the payroll tax package and then come back next week to finish their work.

The aide denied that the idea was a threat to leave town. House Republicans would return to make sure the payroll tax extension and unemployment insurance all get done by the end of the year, the aide said.

"Once the house passes an appropriations bill to keep our government funded there is no reason for House members to sit around here," Boehner told reporters on Thursday. "If the Senate acts, I am committed to bringing the House back and we can do it within 24 hours, if to deal with whatever the Senate does."

"There is absolutely no interest on our part of trying to be strident about this," he added. "We believe it's important to keep the government open and we believe it's important to finish the work the payroll tax, unemployment insurance and the Doc fix."

In a press appearance on Thursday, House Minority Leader Nancy Pelosi suggested delaying the deal was not an option.

"Christmas is ten days away," she said. "The President and Democrats in Congress have been very clear, we are not going home without enacting a payroll tax cut for American working families and extending unemployment insurance for millions of Americans."

"The best analogy I can use is it's like someone saying to her fianc»e, yes I will finally marry you, but I can only do that on February 30th. That day is never coming," she continued. "Nor is the day coming when the President will sign the bill that Republicans passed."

Meanwhile, Reid, Mitch McConnell, R-Ky., and House Speaker John Boehner, R-Ohio, continue to struggle with efforts to eke out a compromise on the payroll tax cut bill.

After a Wednesday meeting at the White House, Senate Democrats indicated that they would be willing to abandon the millionaire surtax as a way to pay for the bill.

But compromise remains elusive: According to Politico, Boehner said after meeting with McConnell and Reid that he couldn't compromise with the Democratic leader. The speaker's motivations appear to be driven at least partially by the political blowback he would get for doing compromising with the top Democrat: "He can't cut a deal with Reid. If he did, our guys would go nuts," a Republican source told Politico.

In debate on the Senate floor on Wednesday, however, McConnell directed Reid to Boehner for further negotiations.

Republicans, meanwhile, do not appear to make much of the Democratic retreat on the millionaire surtax.

"I don't think it's much of a concession," said Boehner spokesman Michael Steel Wednesday, according to the AP. "It never had any chance of passing the Senate, let alone the House."

Democrats strongly object to several measures in the GOP bill, including reforms to long-term unemployment benefits and a provision that would force a quick decision on the controversial Keystone XL oil pipeline.

While negotiations between the two parties will likely continue, both continue to point fingers at the other side of the aisle.

"I'm tired of hearing what the Senate can't do," Boehner told reporters on Wednesday night. "I think it's time for us to wait and see what the Senate can do."

Jill Jackson contributed to this report.