Add to stalemate over payroll tax the threat of government shutdown

The Republican-led House on Tuesday approved the bill it likes for extending the payroll tax cut, set to expire at year's end, and unemployment benefits. The Democratic-led Senate already has denounced the House bill as a nonstarter. Can yet another threat of a government shutdown be far behind?

As Republican and Democratic lawmakers tangle over how to pay the costs of extending tax and jobless benefits, with neither side advancing, a bill to fund government for the remainder of the fiscal year is caught in the stalemate. A stop-gap measure to cover the rest of fiscal 2012 spending expires Friday, and a new omnibus measure to keep government running after that date is stuck in the Senate at the urging, Republicans say, of the White House. 

The payroll tax measure, which would affect some 160 million workers, is what's gumming up the works. 

The $119 billion package that just passed the House would extend the Social Security payroll tax for another year at its current level, 4.2 percent. (Without action by Congress, the rate would revert to its former 6.2 percent.) It also would avert a mandated cut to payments to physicians serving Medicare patients, the so-called “doc fix,” for two years. In addition, it addresses the problem of long-term unemployment, but the measure would gradually phase down maximum coverage from 99 weeks now to 59 weeks after Jan. 1. 

But the measure passed on a near party-line vote, 234 to 193, and contains provisions that Democrats deem to be “poison pills.” One of those would force an early decision on construction of the Keystone XL pipeline from the oil sands of Canada to refineries in Texas. Another would delay new federal rules on reducing air pollution from industrial burners.

Senate majority leader Harry Reid has already declared the House bill “dead on arrival.” Even before the vote, President Obama pledged to veto it.

Hard-ball politics in the waning days of a congressional session are usual, as must-pass issues are held hostage to wanna-pass issues, until the clock runs out. But for a Congress that has already faced the brink of a first-ever default on the US national debt, plus near-shutdowns over fiscal 2011 spending, brinksmanship has settled into habit.

“This is how Congress operates at this time in the year,” says Julian Zelizer, a congressional historian at Princeton University. “Clearly, we’re in an era of heightened partisanship where the incentives do not seem to be there to do business.”

Senate Republican leader Mitch McConnell (R) of Kentucky complained on Tuesday that Democrats, at Mr. Obama's urging, were holding up an omnibus bill to fund government for the balance of the fiscal year that began on Oct. 1. 

“We've got a bipartisan agreement on a number of appropriation bills, and the president presumably – in order to create some political issue, which I find difficult to understand – has instructed Democratic senators not to sign the conference report on a bill they support,” said Senator McConnell at a Tuesday briefing.

 The $1 trillion omnibus bill wraps up spending for nine appropriations bills for the remainder of fiscal 2012, including controversial Labor-Health and Interior-environment bills. In a reverse of the rules for how-a-bill-becomes-a-law, House and Senate negotiators reached agreement before the measure has been voted upon in the House and Senate.

But the White House and Democratic leaders worry that House members will simply leave town after an omnibus spending bill passes, leaving the Senate and Obama to shoulder blame for expiration of the payroll tax cut and reduced levels of unemployment insurance.

“This Congress needs to do its job and stop the tax hike that’s scheduled to affect 160 million Americans in 18 days,” said White House spokesman Jay Carney, in a statement on Tuesday. “This is not a time for Washington Republicans to score political points against the president. It’s not a time to refight old ideological battles. And it’s not a time to ... hurt the middle class by cutting things like education, clean energy, and veterans’ programs without asking the wealthiest Americans to pay their fair share." 

To pay for extended tax breaks, longer-than-usual unemployment benefits, and the "doc fix," Democrats want to institute a surtax on people with incomes over $1 million. For weeks, Obama has hammered Republicans, saying they are sacrificing a tax break important to 160 million workers for the aim of protecting millionaires and billionaires from a modest tax hike.