Congressman Mel Watt called the impasse in Washington, D.C., over the payroll tax cut extension an “embarrassment” to the U.S. government, saying it was “unacceptable” for House Republicans to reject the two-month extension, which will impact 160 million Americans.

Watt said if nothing is done, 4.7 million North Carolinians will be adversely affected, resulting in an estimated $15 to $16 billion loss to the local economy. He said those figures rise even higher, when the amount of money lost from the discontinuation of unemployment benefits for thousands of North Carolinians is also taken into account.

“That’s why this is so important,” Watt said Thursday in a conference call with reporters. “While it’s not a perfect solution to extend these tax cuts for two months while we continue to work on a longer-term solution, it’s certainly much [better] than doing nothing.”

The two-month extension passed with a 89-10 bi-partisan vote in the Senate on Saturday but failed Tuesday in 229-193 party-line vote in the House. 

Watt said that while it is not uncommon for the House and Senate to square off against each other — particularly across party lines — it is highly unusual for the House to reject a bill that was passed with such unanimous bi-partisan support in the Senate.

“The unprecedented thing about this is that this is Republicans against Republicans,” he said. “The Republicans in the Senate have passed what they think is a responsible short-term solution to this … and the House Republicans have just said ‘we don’t care.’”

He says the message being sent from Washington is that House GOP members care more about politics than the interests of the American people, and for that he apologized to small business owners like Lynn St. Laurent, owner of Amelie’s French Bakery, and their employees.

“This is the ultimate kind of ultimate pettiness that the American people have said is unacceptable to them,” said Watt. “They have just brought the whole system down to a screeching halt.”

An uncertain future

St. Laurent, who was also on the call, said that despite a troubled economy, her business has grown. In just three years, she has gone from having five employees to employing more than 70 people. While she would like to expand even more, she doesn’t foresee doing so in the near future because there is so much uncertainty.

“I’m really frightened,” she said. “I don’t know where this is going to go. If we can’t make something happen – that’s so obviously needed – and if we can’t get this extension, what is else is going to come down the line?”

As an employer, St. Laurent says she finds the situation “disturbing” because many of her employees — most of whom make just above minimum wage — are already struggling to survive.

“I’m worried that come January, even a $10 difference is going to have a huge impact on them,” she said. “I’m very concerned … I’m ashamed that our country — or Congress in Washington — is acting in a way that says ‘we really don’t care about how hard it is for you to make ends meet.’”

Watt says the stalemate will surely be disruptive to the economy, particularly because it comes at such an unfortunate time — in the middle of the holiday season.

“Right now we have a crisis situation over the next few days leading to the end of the year,” he said. “People cannot make plans. It’s going to have a negative impact on people’s willingness to buy things around Christmas. Even before you get to the first quarter of 2012, if this is not worked out, it’s going to have a negative economic impact.”

Watt said that although a long-term agreement would be ideal, it is not an option right now. “We need more time,” he said.

According to an ABC News report, an agreement could be reached as early as this afternoon. House Republican leaders are expected to present a proposal with new language to their members in a 5 p.m. conference call, and with unanimous consent, the bill could potentially be passed without requiring all the members to return for a vote.

This is how ABC News is reporting this latest development:

House Republican leaders have decided to accept a short-term extension of the payroll tax cut, sources told ABC News this afternoon, preventing a hike in taxes just nine days before the tax break expires for 160 million Americans.

House GOP leaders appeared to be adopting a compromise suggested by Senate Minority Leader Mitch McConnell to pass the two-month extension in exchange for the Senate appointing members to a conference committee, which will negotiate a longer-term solution. The proposal won a nod of approval from President Obama and Senate Majority Leader Harry Reid.

The deal entails a new bill with language protecting small businesses from a measure in the Senate bill that creates temporary new caps on the wages that are subject to payroll tax relief, a Republican aide said. Reid accepted the House Republicans' proposal late this afternoon. The new bill would require both Senate and House approval.

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