Payroll tax cut and spending bill stall in Senate, raising threat of shutdown

Negotiations over how to extend a payroll tax holiday for 160 million Americans and avoid a government shutdown this weekend ground to a halt Wednesday after a standoff in the Senate over how to proceed.

Amid the gridlock, Cabinet secretaries for the first time formally alerted affected federal workers Wednesday to the possibility of a shutdown — indicating in an ­e-mail that they would determine later which staffers are “essential” to maintain operations in the event of a funding disruption.

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Republicans had enough support to muscle legislation through the House that would continue a payroll tax cut for 160 million workers, a vote that will shift the battleground to a far less receptive Senate. (Dec. 13)

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If there was any sign of progress, it was that Senate Democratic leaders met with President Obama on Wednesday at the White House to weigh whether to drop their demand that the $120 billion payroll tax cut be paid for with a new surtax on millionaires. Republicans have rejected the idea, but it was not clear Wednesday whether that concession from Democrats would be enough to produce a deal.

Many Republicans express deep skepticism that extending the payroll tax cut would spark economic growth, as the president and Democrats have claimed.

With a Friday deadline fast approaching, the threat of a shutdown grew more urgent as a separate omnibus spending bill remained stalled. House Republicans are pursuing a go-it-alone approach on the spending bill, essentially daring Democrats to vote against a deal — bringing closer the prospect of a shutdown at the end of the week, when a short-term funding measure expires.

Republicans also blocked Democratic efforts to vote on a payroll tax bill approved Tuesday by the GOP-led House that would link an extension to a series of Republican initiatives, including an attempt to accelerate the construction of a controversial oil pipeline from Canada to the Gulf Coast.

Senate Majority Leader Harry M. Reid (D-Nev.) said he wanted the vote to prove that the House measure lacks support — a first step, he said, to forcing negotiations on a compromise.Under Senate rules, Democrats can demand a vote on the bill on Saturday but would need members’ unanimous consent to vote before then.

“The sooner we put this useless partisan charade behind us, the sooner we can negotiate a solution that protects middle-class workers,” Reid said.

But Senate Minority Leader Mitch McConnell (R-Ky.) insisted that the Senate should first take up the spending measure, which would keep the government funded through September.

Republicans say bipartisan negotiators have reached a deal on the spending bill. But they say the White House and Reid will not allow a final vote on the measure, holding the bill hostage and threatening a shutdown to increase Democratic leverage on the payroll tax issue.

Once the spending bill passes, House members can go on their holiday break, leaving Senate Democrats with the unpleasant choice of accepting the House’s payroll tax bill, or rejecting it and taking the blame for allowing the tax break to expire.

House Republicans huddled for two hours late Wednesday to discuss whether to proceed with a vote on the spending bill, even without a Democratic sign-off.