U.S. House Speaker John Boehner and Senate Majority Leader HarryReid are poised for a collision next week of their bids to extendor expand a payroll tax cut for workers.

House Republicans rallied yesterday behind a plan Boehner ispreparing that would pair an extension of the current payroll taxcut with eased restrictions on some industrial emissions andexpedited approval of an oil pipeline from Canada. Reid is focusedon expanding cuts to the worker payroll tax and enacting a surtaxon annual income exceeding $1 million to pay for it.

Both leaders agree on extending the Social Security payroll taxcut in some manner, addressing expanded unemployment benefits thatwill lapse at the end of the year, preventing cuts to physicianreimbursements by Medicare and enacting some spending reductions.Their differences over how to pay for a comprehensive package,along with some of their priorities, present procedural hurdlesthat are tough to clear, said Senate Budget Committee Chairman KentConrad, a North Dakota Democrat.

“At this moment, I don't see the formula that gets 60 votes,” hesaid. “I'm still hopeful that we will.”

The House and Senate won't hold votes today and most lawmakersare returning to their districts for the weekend. They face a Dec.31 deadline to address the payroll tax cut or workers will receive2 percent less in paychecks starting in January.

That's a result that both parties want to avoid, said SenatorJoseph Lieberman, a Connecticut independent.

“It's a classic moment of this session of Congress, which isthat both parties are for something and we can't figure out how toget it done,” he said.

The biggest fights likely will center on a Republican demandthat the bill include language that would expedite the approval ofthe Keystone XL pipeline in Canada. The proposed TransCanada Corp.pipeline would carry oil from Canada to the U.S. The Obamaadministration put off a decision on the pipeline until 2013.

President Barack Obama has said he would reject efforts to tieapproval of the pipeline to extension of a payroll tax cut. Boehnersaid the issue should be addressed in the package becausedevelopment of the pipeline will create jobs.

'The Keystone pipeline project would create tens of thousands ofjobs immediately,” Boehner said. “At a time when the Americanpeople are still asking the question 'where are the jobs?,' this isa bipartisan proposal that the president ought to endorse.”

Veto Possibility

Representative Jeb Hensarling, a Texas Republican, exhortedObama not to use his veto on the pipeline issue.

“Mr. President, we will have some of your ideas in the bill,maybe it's time for you to try some of ours,” he told reportersafter the Republican meeting.

House Democratic leader Nancy Pelosi of California saidRepublicans were “injecting poison pills” into the legislation,knowing Obama wouldn't sign it into law with those provisions.

Both parties are interested in continuing expanded unemploymentbenefits beyond their scheduled expiration at the end of the year.They are divided over the details. Over time, Republicans want toscale back how long the unemployed can claim compensation from 99weeks to 79 weeks and eventually 59 weeks, said Representative PatTiberi, an Ohio Republican.

House Ways and Means Committee Chairman Dave Camp, a MichiganRepublican, said yesterday that Republican leaders are stilltalking to members about unemployment benefits “to try to find apolicy that everyone can agree on.

Pelosi said reducing the benefits to 59 weeks would be“problematic” for her caucus.

The Republican bill also would overturn an Obama administrationrule that bars states from conducting drug tests for recipients ofunemployment compensation and would include income-basedeligibility for food stamps, according to Representative AaronSchock, an Illinois Republican.

Both parties have expressed interest in avoiding reductions inreimbursements by Medicare that are due to begin Jan. 1. TheRepublican bill would prevent the cuts for two years and providephysicians with reimbursements that would be 1 percent larger thanthey were this year, according to Representative Phil Gingrey, aGeorgia Republican who is a physician. That would cost $39 billionover 10 years, according to the Congressional Budget Office.

Longer-Term Fixes

Gingrey said Camp promised to consider longer-term fixes to theMedicare reimbursement system next year. Camp's pledge persuadedGingrey to back the package, Gingrey said.

Republicans will find savings, according to Gingrey, byexpanding the pool of higher-income Medicare beneficiaries whowould be required to pay larger premiums for Part B physician care.The plan includes income-based eligibility for the drug benefitprogram under Medicare Part D.

Upper-income senior citizens would pay “closer to the true cost”of the programs, Gingrey said.

Another area of potential agreement is a provision that allowsthe complete write-off of capital investments that RepresentativeCharles Boustany of Louisiana said would be included in theRepublican measure. Unless Congress acts, the ability for fullwrite-offs expires Dec. 31, and in 2012 companies could receiveonly 50 percent bonus depreciation.

Representative Sander Levin of Michigan, the top Democrat on theWays and Means panel, said he could support that provision.

The Senate blocked separate Democratic and Republican billsyesterday that would have extended or expanded the payroll tax nextyear. The Democratic measure, which failed to advance in a 50-48vote, would have reduced the payroll tax to 3.1 percent next yearfor employees. The Republican bill, which stalled in a 22-76 vote,would have extended the payroll tax at the current 4.2 percent ratefor one year.

Both bills needed 60 votes to advance. After the votes, Reidsaid the Republican proposal being drafted in the House wouldn'tsucceed in his chamber.

“House Republicans' bill is a partisan joke that has no chanceof passing the Senate,” he said in a press release. “Instead ofplaying political games, Congress should work to find commonground.”

The House could vote on the Republican plan as soon as Dec. 13,Gingrey said. The House's work won't likely be completed ifDemocrats in the Senate block the measure, setting up possibleback-and-forth maneuvering between the chambers next week.

Boehner “put enough red meat for their Tea Party folks to get itdone,” said Representative Henry Cuellar, a Texas Democrat. “But onthe way back, he's going to lose a lot of those folks becausethey're going to strip out things and then it's up to the Democratsto come in and help it out.”

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