Under a deal reached between House and Senate leaders, the House will now approve as early as Friday the two-month extension of a payroll tax holiday and unemployment benefits approved by the Senate last Saturday, and the Senate will appoint members of a House-Senate conference committee to negotiate legislation to extend both benefits through 2012.
House Republicans — who rejected an almost identical deal on Tuesday — collapsed under the political rubble that has accumulated over the week, much of it from their own party, worried that the blockade would do serious damage to their appeal to voters.
The House speaker, John A. Boehner, determined to put the issue behind his party, announced the decision over the phone to members on Thursday, and did not permit the usual back and forth that is common on such calls, enraging many of them.
After his conversation with lawmakers, the speaker conceded to reporters that it might not have been “politically the smartest thing in the world” for House Republicans to put themselves between a tax cut and the 160 million American workers who would benefit from it, and to allow President Obama and Congressional Democrats to seize the momentum on the issue.
The agreement ended a partisan fight that threatened to keep Congress and Mr. Obama in town through Christmas and was just the latest of the bitter struggles over fiscal policy involving House conservatives, the president and the Democratic-controlled Senate.
Under the deal, the employee’s share of the Social Security payroll tax will stay at the current level, 4.2 percent of wages, through Feb. 29. In the absence of Congressional action, it would revert to the usual 6.2 percent next month. The government will also continue paying unemployment insurance benefits under current policy through February. Without Congressional action, many of the long-term unemployed would begin losing benefits next month.
In addition, under the agreement, Medicare will continue paying doctors at current rates for two months, averting a 27 percent cut that would otherwise occur on Jan. 1.
The new deal makes minor adjustments to make it easier for small businesses to cope with the tax changes and prevents manipulation of an employee’s pay should the tax cut extension fail to go beyond two months.
The House, which is in pro forma session, could seal the deal Friday unless a member raises an objection on the floor; the Senate would then do the same. If an objection occurs, Mr. Boehner will summon the full House back next week for a formal vote, he said.
Mr. Obama, who has reaped political benefits from the standoff, welcomed the outcome.
“This is good news, just in time for the holidays,” he said in a statement. “This is the right thing to do to strengthen our families, grow our economy, and create new jobs. This is real money that will make a real difference in people’s lives. ”
In the end, the agreement seemed a clear victory for Mr. Obama and the Democrats — at least for now. They managed to change the narrative from one about Mr. Obama making a concession — he agreed to a provision in the bill to speed the approval process for an oil pipeline — to one about stonewalling House Republicans, who have spent much of the year holding the upper hand of divided government.
Democrats have been quick to exploit the issue. The Democratic Congressional Campaign Committee this week unleashed automated phone calls, some of which were recorded by the Democratic strategist James Carville, in the districts of 20 targeted House Republicans.
The onslaught will continue. “This is a defining moment,” said the head of the committee, Representative Steve Israel, Democrat of New York. “This by itself doesn’t necessarily alter the political landscape, but the chronic chaos and repeated extremism will help us win back the House.”
The push to find a quick resolution was touched off Thursday by Senator Mitch McConnell of Kentucky, the Republican leader, who had negotiated the two-month extension. After a few days of silence, he called on the House to accept a temporary continuation of the tax cut, and to extend unemployment pay, as long as Senate Democrats committed to quickly opening negotiations over a yearlong agreement.
Robert Pear contributed reporting.
This article has been revised to reflect the following correction:
Correction: December 22, 2011
Because of an editing error, an earlier version of this article misstated the amount of the average tax break for a family making $50,000 a year. The break amounts to $40 each paycheck; not $40 a week.