Republican lawmakers are set to reject a bipartisan compromise on extending a payroll tax holiday and unemployment benefits, in a new twist to a bitter year-end Washington showdown.
Time is running out for Congress to act on President Barack Obama's demand for a plan to alleviate the pain of the middle class and help the jobless: if lawmakers cannot produce within 11 days, 160 million Americans face a tax hike.
The row ensures that a year of bitter division and recrimination in US politics will end in even deeper discord, setting the stage for what is likely to be an ugly year of partisan bickering as Obama seeks reelection in 2012.
The imbroglio had seemed solved on Saturday when Republicans and Democrats in the Senate agreed to extend the payroll tax holiday for an interim period of two months, along with jobless benefits for around two million people.
But Republicans in the House of Representatives, swayed by the conservative Tea Party faction, revolted, swapping an initial coolness for the extension, and calling instead for another year at lowered payroll tax rates.
"Our members do not want to just punt and do a two-month, short-term fix where we have to come back and do this again," Speaker of the House, John Boehner, told reporters on Monday night.
"We're here. We're willing to work," he said.
Originally, Republican leaders planned to hold votes on Monday night, but after a long meeting of party lawmakers put off the action on the bill until Tuesday.
It appeared that some in the Republican caucus were unwilling to cast a vote that would effectively raise payroll taxes that all workers contribute to the retirement savings system from the current 4.2 percent to 6.2 percent.
Republican leaders may simply decide to shelve the Senate plan, and vote instead on a motion calling for a conference of House and Senate lawmakers to seek a fresh deal.
That solution may not work however, because Senate Democratic Majority leader Harry Reid has refused to bring his members back to Washington after sending them away for their Christmas and New Year holiday at the weekend.
Senior Democratic Senator Chuck Schumer said the House Republican plan was merely a bid to squelch the legislation but avoid taking the blame, as Obama slams Republicans for depriving Americans of a tax cut.
"House Republicans claim to support this middle class tax cut, but they are really trying to bury it in a committee," Schumer said.
"Speaker Boehner is using one of the oldest tricks in Washington of claiming to support something and then sending it to a legislative graveyard."
A new round of dysfunction on Capitol Hill would also likely deepen already acute cynicism towards Congress felt by most American voters, and could shape the emerging battlefield of Obama's 2012 reelection bid.
Obama had originally asked for a year-long payroll tax extension but settled for a two-month reprieve for workers as Democrats in the Senate were unable to agree with Republicans on how to pay for the tax cut.
House Republican sources disputed reports that Boehner had reversed his position on the Senate compromise after a revolt from his most conservative members.
They also said that the White House had made no attempt to contact the Republican leadership over the issue.
Obama has said he will not begin his Christmas and New Year vacation in his native Hawaii until the payroll tax holiday, designed to stimulate the economy, is extended and unemployment benefits are also assured.
The Senate deal also thrusts the contentious Keystone XL pipeline, to carry oil from Canada's tar sands to the US Gulf Coast, back onto the political agenda.
Obama had put off a decision on the project, which pits environmentalists against labor unions and business interests in his political base, until after his bid for a second term, drawing Republican howls.
But as part of the compromise Obama had to accept language forcing him to reconsider it within 60 days, putting him in a dicey political spot and enraging environmentalists who lean Democratic and campaigned against the project.