Split on Payroll Tax Cut Threatens Government Shutdown

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The U.S. House of Representatives approved a bill on Tuesday that would extend the payroll tax cut and speed up the process for government approval of the Keystone XL oil pipeline, but widespread Democratic opposition to the bill means it will likely be shot down as it moves to the Senate on Wednesday.

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The House approved the bill yesterday on a 234-193 vote, largely along party lines. The White House has said that President Barack Obama will veto the plan should it ever reach his desk.

“This Congress needs to do its job and stop the tax hike that’s scheduled to affect 160 million Americans in 18 days,” White House spokesman Jay Carney said in a statement after the vote. “This is not a time for Washington Republicans to score political points against the president,” by forcing a decision on the Keystone pipeline before the 2012 elections.

While Democrats and Republicans alike agree on extending the payroll tax cut, Obama said he will reject any bill that links the cuts to the pipeline. Obama and Senate Majority Leader Harry Reid (D-Nev.) agree that Congress must not go home for the holidays without extending the payroll tax cut that saves working Americans an average of $1,000 a year, Carney said.

Obama wants Congress to approve both a payroll tax plan and a broad government spending bill before holiday recess is supposed to begin at the end of the week.

Earlier, Speaker John Boehner (R-Ohio) and other House Republicans told reporters the payroll tax measure had bipartisan support and would create jobs while also preventing a tax increase for American workers next year. When the bill came to a vote 10 Democrats joined 22 Republicans in voting in favor, while 14 Republicans jointed 179 Democrats in voting against it.

The State Department is currently considering objections from environmentalists to the Keystone XL pipeline, which would bring oil from Canada’s oil sands in northern Alberta to Texas. Originally slated to make a decision by the end of the year, the State Department recently said its decision would be delayed until 2013 to allow thorough examination of environmental issues raised by critics in a move Republicans labeled as political, as it put off a decision until after next year’s presidential election.

Reid and other Democrats agree that the pipeline project requires more study and should not be fast-tracked as part of a political calculation by Republicans. On Tuesday, Reid said Republicans must compromise with Democrats instead of trying to push through proposals intended to appease conservatives in their caucus.

The House GOP proposal would both change the process and shorten the time frame for the government to approve the proposed pipeline project. However, the State Department said on Monday that fast-tracking approval would make it impossible to complete the needed environmental, national security, and safety studies.

“In the absence of properly completing the process, the department would be unable to make a determination to issue a permit for this project,” the State Department said in a written response to questions about the measure.

The House GOP measure passed yesterday would extend the payroll tax cut for another year, as well as renew aid for the unemployed while cutting back the maximum length of jobless benefits from the current 99 weeks to just 59 weeks.

The bill would also allow states more flexibility in distributing unemployment assistance, permitting states to require applicants to submit to drug tests or show they are pursuing a high school degree if they don’t already have one.

The bill would also avoid a scheduled cut in pay for Medicare physicians for two years in a provision known as the “doc fix.”

GOP leaders suggest a series of spending cuts to pay for the bill, including freezing pay for federal employees and members of Congress, eliminating a child tax credit for those in the U.S. illegally, and increasing Medicare premiums for those who earn more than $80,000 annually.

The pipeline issue is only part of the problem for Senate Democrats who disagree with the GOP bill’s “central elements,” including the length of the unemployment insurance extension, the proposed cost offsets, and the weakening of some environmental regulations.

Senate Democrats have been working on a bill of their own since Republicans blocked progress on their previous proposals, which included a surtax on income over $1 million. Meanwhile, the House Appropriations Committee is working on a year-end spending bill that wraps nine remaining bills into one package.

Committee Chairman Hal Rogers (R-Ky.) said there are some “policy riders” in the deal, but declined to get into specifics, saying he wants the staff to finish writing the legislation before he talks about any details. Rogers was confident the House would pass the bill by Friday, but according to two senior House Republican leadership aides, Reid has told Boehner he will hold up the spending bill until both sides negotiate a compromise on the payroll tax cut bill.

Congress may have to pass a short-term spending measure to prevent a shutdown if the parties fail to reach an agreement by the end of Friday.

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