The Senate has passed a two-month extension of the payroll tax cut and unemployment benefits, but House Republican leaders and some Democrats balked at the short-term extension.

The Senate voted 89-10 on Saturday to approve the two-month extension after Democrats and Republicans were unable to agree on a way to pay for a full year’s extension (see Congress Gets Closer to a Deal on Payroll Tax Cut). Seven Republicans, two Democrats and one independent voted against the extension.

The House had passed a one-year Republican-sponsored extension of this year’s 2-percentage-point cut in Social Security and Medicare withholding taxes last Tuesday, along with an extension in unemployment benefits and the so-called “doc fix” to prevent Medicare reimbursements to physicians from plunging 27 percent. But the bill also included controversial provisions such as gradually reducing the maximum number of weeks of federal emergency extended unemployment benefits from 99 to 59 by 2014, extending a pay freeze for federal workers, cutting the federal workforce, means-testing retirement benefits, and requiring President Obama to make a decision within two months on the controversial Keystone XL oil pipeline from Canada to Texas (see House Passes GOP Payroll Tax Cut Extension Bill).

On Saturday, House Republicans held a conference call, and many of the members reportedly expressed frustration with the Senate’s limited extension, which would require another round of divisive votes in February. On Sunday, Speaker of the House John Boehner, R-Ohio, said on NBC’s “Meet the Press” that instead of requiring the House to vote on the Senate’s two-month extension bill, the two chambers should set up a conference committee to work out the differences between the two bills.

“It's pretty clear that I, and our members, oppose the Senate bill,” said Boehner. “It’s only for two months. The President said we shouldn’t go on vacation until we get our work done, and frankly, House Republicans agree. We passed a one-year extension of the payroll tax credit, unemployment insurance with reforms, making sure that those doctors who treat Medicare patients are not going to see their reimbursements cut. We had a reasonable, responsible bill that we sent over to the Senate. If you talk to employers, they talk about the uncertainty. How can you do tax policy for two months? So we really do believe it’s time for the Senate to work with the House, to complete our business for the year. We’ve got two weeks to get this done. Let’s do it the right way.”

Boehner likened a two-month extension to simply “kicking the can down the road.” He noted that under the regular order of the Constitution, when there are disagreements between the House and Senate, there would be a formal conference between the two chambers. However, since many members of the Senate have already left for the holiday break, it may be difficult to set up a conference committee and get compromise legislation passed before the end of the year. House Republicans plan to meet Monday on modifying the Senate bill, and the House is scheduled to vote on the bill Monday evening, setting up the possibility that the legislation would be amended.

House Democrats are expected to support the Senate bill, and President Obama has also signaled his willingness to sign it, even though he had earlier threatened a veto if the Keystone XL provision were included. However, some Democrats are also uncomfortable with a two-month extension.

"A two-month extension of unemployment insurance and the payroll tax cut is wholly inadequate as the American people digging out of the deepest recession in decades deserve much more certainty and compassion about their economic distress,” said House Ways and Means Committee ranking member Sander Levin, D-Mich., in a statement Saturday. “Medicare patients also deserve to know after a lifetime of hard work that their doctors will be there when they need them. During this two-month period, workers in some of the hardest-hit states—including Michigan, Ohio, Indiana and Missouri—are projected to lose access to the 20-week Extended Benefits program, and with very little warning tens of thousands of long-term unemployed Americans will be cut off unemployment insurance.”

Left unaddressed by either the House or Senate bills is the status of a host of expiring tax breaks, including a “patch” to prevent the alternative minimum tax  from applying to millions more taxpayers.

Senate Finance Committee chairman Max Baucus, D-Mont., said Saturday that the Senate would address those tax breaks in January. His office said he had been working with his colleagues to find a bipartisan path forward for a variety of tax extenders, including the research and development tax credit, teacher’s expense deduction, and clean energy tax incentives, and that it was critical to extend those tax provisions early in the year to maximize their effect and provide certainty for the 2012 tax year.

“As we work together on comprehensive tax reform for the long-term, reaching a permanent agreement on expiring tax cuts right away must be our top priority,” Baucus said in a statement.

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