US Republicans in climbdown on payroll tax deal
House of Representatives Republican Speaker John Boehner has agreed to accept a bipartisan deal to extend a payroll tax cut, in an abrupt U-turn.
He had refused a vote on the bill, which was passed by Republicans and Democrats in the Senate last Saturday.
Correspondents say the move amounts to a cave-in by House Republicans, and victory for President Barack Obama.
The tax break is due to expire on 31 December, and would hit the pay slips of some 160 million American workers.
The measure saves about $1,000 (£638) each year for an average US income.
Muted conference call
It was a rare retreat for Republicans, who since gaining control of the House in 2010's mid-term elections have wrung a string of concessions from the White House.
Conservatives were initially sceptical about extending the payroll tax break, which economists say would aid US economic recovery.
But as Republicans demurred over the $120bn (£76bn) cost of the plan, Democrats had accused them of backing tax cuts only for the wealthiest Americans.
Correspondents say Mr Boehner's climbdown reflects a realisation in his party that it would have faced blame for an effective tax rise on US workers in a general election year.
Under the compromise, House Republicans came away with face-saving language on making the package more friendly to small businesses.
And Senate Democrats will appoint negotiators to work out the year-long deal that was demanded by House Republicans and originally by Mr Obama.
Key elements of the two-month Senate bill include extending the tax cut and unemployment benefits.
A Republican-backed clause also remains, forcing Mr Obama to make a politically awkward decision on the controversial Keystone XL oil pipeline within 60 days.
The new deal is expected to be put to the Senate and House on Friday. The House plans to hold a voice vote, which requires only a few members to be present.
Mr Boehner told Republican rank-and-file members about Thursday's agreement in a muted conference call, where they could not ask questions.
A similar call last weekend prompted a revolt from Tea Party opponents of the bipartisan deal, prompting this week's political showdown.
"We were here fighting for the right thing," Mr Boehner told a news conference, when asked if he had caved. "It may have not been politically the smartest thing to do."
Republican divisions exposed
President Obama, who with his Democratic allies has kept up relentless pressure on Republicans this week, welcomed the breakthrough.
"This is good news, just in time for the holidays," he said in a written statement. "This is the right thing to do to strengthen our families, grow our economy and create new jobs."
Earlier in the day, the president read out messages at a news conference from voters who said the package would help them pay their heating bills, visit elderly relatives and treat their families to pizza dinners.
Mr Obama has postponed a family vacation in Hawaii due to the impasse.
Unlike other budget stand-offs this year, this one has exposed Republican divisions.
"An 'all or nothing' attitude is not what my constituents need now," Representative Rick Crawford, from Arkansas, wrote to Mr Boehner on Thursday.
The lawmaker's letter came two days after he published a statement against the two-month extension.
Also on Thursday, Senate Republican Minority Leader Mitch McConnell broke his silence on the issue to urge his House colleagues to pass the measure.
Other Republican senators have spoken out this week against their counterparts, too.
The Wall Street Journal's conservative editorial on Wednesday labelled the episode a "fiasco" that could end up re-electing Mr Obama.
The president's approval ratings have risen in several recent polls to nearly 50%, up from the low 40s in previous months.