After days of wrangling that even House Speaker John Boehner acknowledged "may not have been politically the smartest thing in the world," the Ohio Republican abruptly changed course and dropped demands for immediate holiday season talks with the Senate. The breakthrough probably spares workers a hit in their paychecks that would have kicked in Jan. 1.
Boehner said he expects both House and Senate to pass a new bill by Sunday that would renew the tax break while congressional negotiators work out a longer-term measure that would also extend jobless benefits for millions of Americans and prevent doctors from absorbing a big cut in Medicare payments.
The developments were a clear win for Obama. The payroll tax cut was the centerpiece of his three-month campaign-style drive for jobs legislation.
"Because of this agreement, every working American will keep his or her tax cut - about $1,000 for the average family," Obama said in a statement. "That's about $40 in every paycheck. And when Congress returns, I urge them to keep working to reach an agreement that will extend this tax cut and unemployment insurance for all of 2012 without drama or delay."
The House and Senate could approve the legislation as early as Friday by voice votes.
The GOP retreat ends a tense standoff in which Boehner's House Republicans came under great pressure to agree to the short-term extension passed by the Senate on Saturday. The speaker was open to the idea, But rank and file Republicans revolted and the House instead insisted on immediate talks.
Just hours before he announced the breakthrough, Boehner had made the case for a year-long extension.
But the top Republican in the Senate, Mitch McConnell of Kentucky, instead urged the House to accept the outlines of the Senate legislation. Resolve was crumbling among tea party-backed Republicans, too.
"I don't think that my constituents should have a tax increase because of Washington's dysfunction," said freshman Rep. Sean Duffy, R-Wis.
"An `all or nothing' attitude is not what my constituents need now," Rep. Rick Crawford, R-Ark., wrote in a letter to Boehner. "We are now in a position...that requires Republicans to not only demand a willingness to compromise, but to offer it as well."
On a conference call, Boehner informed his colleagues that it was time to yield.
"He said there comes a time when you've got to move on, and this is the time," said Rep. Jack Kingston, R-Ga., paraphrasing Boehner's comments during the conference call, which he said lasted only three or four minutes. "I'm making my decision right now."
The rapid-fire developments underscored the urgency of the search for resolution when Americans deeply disapprove of Congress and are struggling to make it in an economy slowly recovering from recession. Politics also played a significant role: The standoff put Republican presidential candidates in an awkward position less than two weeks before the Iowa caucuses that begin the nomination process, on the cusp of the 2012 elections.
In competing news conferences and statements earlier, all sides sought to avoid blame should taxes go up Jan. 1, just as Americans begin paying holiday bills. House Republicans in particular were facing fire from GOP establishment figures incensed that they would risk losing the tax cut issue to Democrats at the dawn of the presidential and congressional election year.