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Shutdown fears rise with approval of payroll tax cut extension in House

WASHINGTON — Prospects for a year-end congressional compromise on key tax and spending legislation grew more complicated Tuesday, as the Republican House passed a controversial version of a payroll tax cut extension despite a veto threat from the White House.

The increasingly contentious tax dispute threatens to derail what had been an emerging compromise on separate legislation to fund the government through next September, raising the specter of a possible government shutdown this weekend if the conflict is not resolved by Friday.

Approved on a vote of 234-193, the Republican tax bill would extend a one-year break in the Social Security payroll tax that is due to expire at the end of the month, setting the rate at 4.2 percent for the year instead of allowing it to revert to 6.2 percent. But it also would accelerate construction of an oil pipeline from Canada to Texas that the White House is determined to slow down.

The measure's passage represented a victory for House Speaker John Boehner, R-Ohio, who was able to muscle it through the chamber largely on Republican votes, drawing support from conservatives wary of the tax cut by loading the bill with other GOP-favored items.

To fund the cut, the measure would freeze pay for civilian federal workers for another year and reduce the federal work force.

It would extend benefits for the long-term unemployed but reform the unemployment insurance program to reduce the maximum time those out of work can receive benefits, from 99 weeks to 59 weeks. It also would allow states to require drug testing for benefits.

The measure would postpone scheduled cuts in Medicare reimbursement rates for doctors but pay for the "doc fix" by raising Medicare premiums for upper-income seniors and eliminating some funding for the federal health care law.

Boehner said the House has acted on the tax issue and he suggested that it is now up to the Senate to move as well or let the tax cut expire.

"The American people are asking, 'Where are the jobs?' '' Boehner said.

Ten Democrats voted with Republicans to approve the measure in the House; 14 Republicans opposed it. Florida's delegation voted along party lines.

Senate Majority Leader Harry Reid, D-Nev., called the bill a "pointless partisan exercise" and characterized it as an ideological grab bag of Republican pet projects.

President Barack Obama has rejected linking the payroll tax issue to the approval of the 1,700-mile Keystone XL pipeline, and the State Department, which is responsible for examining the environmental impact of the cross-border project, announced Monday that it would not be able to complete the proper reviews in 60 days, as required by the House bill. The State Department decided last month to delay the project until 2013, to allow the project's developer to figure out a way around Nebraska's Sandhills, an ecologically sensitive region that includes an aquifer that supplies water to eight states.

But a formal veto threat from the White House on Tuesday did not mention the pipeline. Instead, it accused Republicans of cutting programs needed by middle-income workers to fund the tax reduction.

To pay for extending the cut, Democrats have pushed for a surtax on those making more than $1 million a year. Although the Senate has twice blocked bills that would fund the reduction with a millionaire's tax, Reid said again Tuesday that the wealthy should be asked to fund the tax cut for middle-class workers. He also said Democrats would be willing to extend the tax cut without outlining a way to pay for it.

In the meantime, lawmakers tapped to negotiate a compromise on a separate government spending measure did not advance a deal Tuesday.

Republicans insist that Democrats on the Appropriations Committee had signed off on a tentative agreement designed to provide government funding stability for nearly a year and spare Congress another embarrassing budgetary conflict.

Boehner said Reid and Obama instructed the lawmakers who brokered the deal to withhold their final signatures from a report that would send the deal forward for a vote to gain leverage on the payroll tax issue.

Boehner accused Democrats of trying to leverage political concessions by holding hostage the functions of government.

Democrats fear that once the House passes the spending measure, it could adjourn for the holidays, forcing the Senate to either accept its version of the payroll tax bill or allow the tax cut to expire.

Democrats acknowledged that lawmakers were close to a deal after months of tough talks but denied that the two sides had reached a final agreement.

"We know for a fact that there are very important issues that remain to be resolved," White House press secretary Jay Carney said.

Democrats said those issues include whether to include language that would reverse a decision by Obama to make it easier for Americans to visit relatives in Cuba and another provision to block new standards for incandescent light bulbs.

If the spending issue is not resolved by Friday, lawmakers raised the possibility for the first time Tuesday that they might have to adopt a short-term continuing resolution measure this week that would keep the government open while they battle into next week.

Shutdown fears rise with approval of payroll tax cut extension in House 12/13/11 [Last modified: Wednesday, December 14, 2011 7:35am]
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