Senate leaders say deal on spending, tax cut measures may come soon

December 15, 2011

Showing a new conciliatory tone, Senate leaders opened congressional business Thursday by suggesting that a bipartisan compromise might come soon on a spending measure to keep the government running past Friday and a bill to extend a one-year cut in the payroll tax rate paid by 160 million workers.

Senate Majority Leader Harry M. Reid (D-Nev.), who has been holding up a $1 trillion spending measure that would fund much of the government through next September, said he believes both issues can be resolved “in the next few days.”

Minority Leader Mitch McConnell (R-Ky.) likewise said that he and Reid have been in talks about how to move forward and that he is “confident and optimistic” about an agreement.

The government would face a partial shutdown at midnight Friday unless Congress resolves its latest spending battle.

“We’ve done enough back and forth — the Republican leader and me staking out our positions, and our positions are fairly clear to the American people,” Reid said on the Senate floor. “What we’re going to try to do during the next few hours is work toward resolving some of the outstanding issues.”

Speaking Thursday at the White House, President Obama said Congress must solve the payroll tax issue and get a funding bill in place before adjourning for the holidays.

But he did not address whether a compromise is emerging or whether he has withdrawn objections to the pending spending measure.

“Congress cannot and should not go on vacation before they have made sure that working families aren’t seeing their taxes go up by $1,000 and those who are out there looking for work don’t see their unemployment insurance expire,” he said. “There’s no reason the government should shut down over this, and I expect all of us to do what’s necessary in order to do the people’s business and make sure it’s done before the end of the year.”

Overnight, House leaders advanced a spending bill that had been negotiated by Republicans and Democrats on the House Appropriations Committee. Democratic leaders have kept the measure from moving forward after the White House expressed lingering concerns with some of the bill’s provisions and said it wanted Congress to agree to extend the tax cut first.

By filing the bill, the House indicated it would push ahead with the measure even without Democratic support.

Reid said Thursday that such House action would be a mistake. But he called the remaining Democratic concerns with the spending measure “resolvable” and “small in number” and said Congress is getting closer to a deal.

The Senate leaders’ apparent optimism comes after negotiations over how to extend the tax holiday and avoid a government shutdown ground to a halt Wednesday.

With a Friday deadline fast approaching, the threat of a shutdown grew more urgent. Cabinet secretaries for the first time formally alerted affected federal workers to the possibility of a shutdown — indicating in an ­e-mail that they would determine which staffers are “essential” to maintain operations in the event of a funding block.

Senate Democratic leaders met with 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 a 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 argued.

On Wednesday, Senate Republicans also blocked Democratic efforts to vote on a payroll tax bill approved Tuesday by the GOP-led House. The bill would link the tax extension to a series of Republican initiatives that include speeding up the construction of an oil pipeline from Canada to the Gulf Coast. Obama opposes tying the spending measure to the Keystone XL pipeline.

Reid 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 Saturday but 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 McConnell 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.

Before filing the government funding bill after midnight Thursday, House Republicans huddled for two hours late Wednesday to discuss whether to proceed with a vote, even without a Democratic sign-off.

That could prove tricky. Many conservatives object to the bill’s $1.043 trillion spending level, negotiated by Democrats and Republicans in the August debt deal, and it’s not clear whether the bill could pass without some Democratic support.

House Speaker John A. Boehner (R-Ohio) told reporters late Wednesday that no decisions had been made, but that the House had acted to extend the tax cut and now it was the Senate’s turn.

“I’m tired of hearing what the Senate can’t do,” he said. “I think it’s time for us to wait and see what the Senate can do.”

When the House passes a spending bill, lawmakers 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.

The tension highlighted the fact that neither side has come up with a way to pay for the tax cut that can get the 60 votes necessary for Senate approval.

Senate Democrats say that the House bill is unacceptable and that they will vote against it, and the White House has said Obama would veto it.

Their objections center on several GOP initiatives added to the bill to attract votes from conservatives, many of whom would not support the tax cut extension otherwise. They include cuts in unemployment benefits, new rules that could require the unemployed to take drug tests and enroll in GED programs to receive benefits and the delay of new regulations on boiler emissions.

The bill would also extend a pay freeze for federal workers and raise Medicare premiums for upper-income seniors. And the two sides are clashing over a provision that would force a decision on a construction permit for the Keystone XL within 60 days. The State Department, which is reviewing the pipeline issue, has said that if forced to make a decision so quickly, it would have to deny the permit.

Twice, the Senate has also blocked Democratic proposals for the millionaire surtax.

If government shuts down, some agencies and departments would continue working, thanks to a partial spending bill passed in November. The departments of Agriculture, Commerce, Housing and Urban Development, Justice, State and Transportation, as well as NASA and some other smaller agencies, would be spared.

But much of the government would be shuttered. National parks would close, for instance, and processing of some passports would cease. The showdown marks the fourth time this year that congressional disputes have dragged the government to the brink of a partial shutdown.

Behind the white-hot rhetoric of their leaders, many rank-and-file lawmakers predicted that there would be a last-minute compromise to extend the tax cut and prevent a shutdown. A number of them wearily said that the only casualty of the fight would be Congress’s already battered reputation.

“It’s all going to get passed eventually,” said Sen. Tom Coburn (R-Okla.). “But the political maneuvering is sickening.”

Staff writers Paul Kane, Ed O’Keefe, David Nakamura and Felicia Sonmez contributed to this report.

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