Congress reaches deal on payroll tax cut and jobless benefits

By Karoun Demirjian

Friday, Dec. 16, 2011 | 7:11 p.m.

WASHINGTON — By noon tomorrow, Congress will have passed a budget to fund the government through the end of the fiscal year.

But when it comes to payroll taxes and unemployment insurance, short-term stopgap measures are still the way things will be working, at least in the near future.

Congressional leaders and White House officials agreed Friday to a two-month extension of the current payroll tax cut (one that lowers the rate workers pay from 6.2 percent to 4.2 percent), an equal-length extension of unemployment benefits, and a correction to the tax code to properly reimburse doctors who see Medicaid patients.

And one more key provision: a directive to the president to decide one way or another whether he will allow construction on the Keystone XL oil pipeline from Canada to the Gulf Coast to commence before the two months are up.

It’s a version of a deal Democrats said they would never make with Republicans, who have been pushing to include the oil pipeline in the package for weeks.

“Let’s not just pass a bill that helps people on the benefits side,” Senate Republican Leader Mitch McConnell said Friday morning. “Let’s also include something that actually helps the private sector create the jobs Americans need for the long term.”

Republicans, and the Democrats who support the initiative, believe the Keystone project will create at least 20,000 jobs, funnel billions into the economy and reduce the nation’s dependence on foreign oil. Business and union lobbyists agree.

The environmental lobby doesn’t though. Keystone’s planned route cuts across the Midwest’s biggest and most important aquifer, the Ogallala — and environmentalists warn that putting an oil pipeline near such an anchor for the ecosystem and agriculture is asking for trouble.

Earlier this year, as activists took to the streets of Washington, D.C., to demonstrate against the pipeline, the Obama administration decided to table a decision on whether to give the Keystone project the go-ahead until the 2013 elections.

Las Vegas is more than 1,000 miles from the pipeline’s path. The absence if any direct impact might allow Nevada Democrats to vote for a deal with Keystone in it.

“I think the Keystone component would be a poison pill that would prevent a number of people on my side of the aisle from voting for [the payroll tax bill],” Nevada Rep. Shelley Berkley said Friday.

But when asked if she counted herself among those Democrats, she said “not necessarily...I’m not drawing a line in the sand on anything.”

Berkley voted against the Keystone pipeline in July when the House considered it as a separate issue; 47 Democrats sided with the Republicans on that vote.

But this time, Berkley’s priority, she said, was seeing that the unemployment benefits and payroll tax cuts are extended for whatever length of time is possible, even a short one like the two-month agreement lawmakers appear to have tenuously reached. “It’s not my preference, but I prefer that to ending the benefits,” Berkley said. “I don’t want to leave Washington for the holidays knowing that middle income families are going to have their taxes increase by anywhere from a thousand to $1,500 a year...and the unemployment benefit extension will affect 36,000 Nevada families.”

Nevada Rep. Joe Heck, a Republican, thinks the Keystone pipeline can help those struggling families.

“The more folks that are going to be working and making money from the Keystone pipeline, the more people will have the opportunity to come visit our fair city,” Heck said, “and leave some of their money in our shops, restaurants and gaming institutions.”

“This is job security, it’s economic security, it’s national security,” he added.

Nevada Rep. Mark Amodei and Nevada Sen. Dean Heller, both Republicans, also support the Keystone XL project.

But Nevada Sen. Harry Reid, Democratic Leader of the Senate, has been holding a hard line against including Keystone.

When the White House issued a veto threat of the House’s payroll tax bill this week -- a measure that included a roll-back of industrial boiler safety measures as well as the Keystone language -- many leapt on the fact that the veto threat did not mention the oil pipeline.

“There was no need to mention Keystone pipeline,” Reid told reporters later that day, recalling a State Department memo from the day before that indicated the government is looking at alternate routes for the pipeline. “They said it all yesterday.”

The language under discussion for the payroll tax bill would not automatically set construction workers loose in America’s breadbasket laying pipe to pump oil. It’s simply a direction to the president to make a decision in 60 days about whether or not he feels the pipeline can go forward.

The Obama administration is under no obligation to approve the project -- and probably won’t. But while declaring it to be counter to the national interest may not cost Obama anything in terms of policy, it could set him up for a political fight from project supporters.

“President Obama has said his first priority is jobs,” McConnell said Friday morning. “Well, here’s an opportunity for the president to show it.”

The Senate reconvenes at 9 a.m. EST Saturday to debate and vote on the payroll tax cut/unemployment benefits/Keystone pipeline bill. The House, which disbanded for the weekend, is expected to return to Washington, D.C. to complete work on the measures.