Congress appears to have averted an imminent government shutdown, striking a $1 trillion deal to fund the federal government through next September.
Both the House and Senate are expected to vote on the giant spending bill on Friday, ahead of the midnight deadline when stop-gap funding for government operations runs out.
But congressional leaders and the White House are still laboring over a plan to extend payroll tax cuts and long-term unemployment insurance, set to expire on Dec. 31. All sides say they want to reach a deal on these measures, but they split on partisan lines over how to pay for it.
Republicans say the pay-for must be spending cuts. President Obama and Democrats say the highest-income Americans, or top 1 percent, must shoulder higher tax rates to help reduce the deficit. Lawmakers are working Friday to try to reach agreement on a two-month extension of these benefits for workers, before they head home for the holiday recess. A Senate vote is likely Saturday morning.
As for the huge omnibus spending bill, Democrats and Republicans had settled back in August the toughest issue in any budget cycle – the bottom line for spending. The remaining sticking points were the policy riders – congressional mandates aimed at forcing a presidential administration to adopt positions it otherwise would oppose.
These included reining in environmental regulations, chopping funding for green energy loans, halting new light-bulb efficiency standards, banning federal or local funding for abortions in the District of Columbia, faster approval for new offshore energy production, and reinstating Bush-era limits on travel to Cuba and remissions to relatives in Cuba, to name a few.
In a bid to avert a shutdown and move the massive omnibus bill to the floor, congressional negotiators agreed to drop some of the most controversial policy riders, such as restrictions on travel to Cuba.
Negotiators had all but declared closure on this package last weekend, but the White House and Senate majority leader Harry Reid called on Democrats to hold off signing the agreement, in a bid to increase leverage on House Republicans to come to terms on the payroll tax and unemployment insurance.
But the prospect of a government shutdown lowered the heated rhetoric on both sides of the aisle. Republicans agreed to boost funding for enforcement of Wall Street regulations passed by the previous Democratic-led Congress.
In a gesture toward resolving the payroll-tax standoff, Democrats said they might yield on their demand for the surtax on millionaires – which has been a nonstarter for Republicans.
He added: “There is absolutely no interest on our part in trying to be strident about this. We believe that it’s important to keep this government open, and we believe it’s important to finish the work on the payroll tax cut, unemployment insurance, and the ‘doc fix.’ "
Significant differences remain between House and Senate negotiators over extending the payroll tax holiday, extended unemployment benefits, and a “fix” to a formula that would mean an immediate 27 percent pay cut to doctors who treat Medicare patients.
The House has already passed a bill that tackles these issues, but Senate Democrats oppose a provision that gradually cuts back the maximum number of weeks of unemployment benefits from the current 99 to 59. They also dislike a provision that explicitly allows states to require drug tests of jobless workers seeking benefits. Republicans say their reforms will help get workers back to work. Democrats say that, with four workers chasing every one job, that’s unrealistic.
“I want to call the recipients of TARP money to also be drug-tested,” quipped Sen. Tom Harkin (D) of Iowa, referring to the Wall Street bailouts launched in the Bush administration. “We’d pick up some of these cocaine sniffers up in New York.”