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White House challenges Republican payroll tax plan

By Tom Cohen, CNN
updated 9:54 PM EST, Mon December 12, 2011
Senate Republican leader Mitch McConnell:
Senate Republican leader Mitch McConnell: "Obviously we'll reach an agreement" to extend the payroll tax cut.
STORY HIGHLIGHTS
  • NEW: "All the work has been done" on the pipeline plan, Boehner says
  • The State Department says it couldn't approve the pipeline under the GOP plan
  • Workers face higher taxes, if the lower payroll tax rate isn't extended by the end of the year
  • Republicans say a payroll tax cut deal will happen but differ on details

Washington (CNN) -- Republicans demanding specific ideological provisions as part of a deal to extend the payroll tax cut appear to be going against their party's anti-tax orthodoxy, White House spokesman Jay Carney said Monday.

Asked by reporters about a Republican plan to maintain the reduced payroll tax rate for another year, Carney questioned why the party that traditionally supports tax cuts is driving such a hard bargain on one that helps American workers and their families.

"What happened to Republican support for tax cuts?" Carney asked, noting what he called the "passionate" GOP opposition this year to Democratic efforts to end Bush-era tax cuts for wealthy Americans.

When it comes to easing the tax burden for working-class taxpayers, Carney said, the Republicans are demanding ideological provisions in the payroll tax cut legislation that they know Democrats oppose.

The plan by House Republicans, expected to come up for a vote as soon as Tuesday, links the payroll tax rate issue to a provision to speed up government approval of a proposed oil pipeline from Canada's oil sands production in northern Alberta to Texas.

The State Department recently said its decision on the Keystone XL pipeline would be delayed until 2013 to examine environmental issues raised by critics, a move Republicans labeled as political to put off the issue until after next year's presidential election.

President Barack Obama said last week that he will reject any effort to link the oil pipeline to extending the payroll tax cut, which will maintain $1,000 in tax savings for American workers.

Hutchison: Payroll tax cut will continue

The House GOP proposal would both change the process and shorten the time frame for the government to approve the proposed pipeline from Canada's oil sands production in northern Alberta to Texas. But Monday, the State Department said that would make it impossible for it to complete needed environmental, national security and safety studies.

"In the absence of properly completing the process, the Department would be unable to make a determination to issue a permit for this project," the State Department said in a written response to questions about the measure.

But House Speaker John Boehner dismissed the State Department's warning, saying the pipeline had been under review for three years and, "All the work has been done."

"The only thing arbitrary about this decision is the decision by the president to say, "Well, let's wait until after the next election,' " said Boehner, R-Ohio. "The American people want jobs, and this is as close to a shovel-ready project as you're ever going to see."

The House GOP measure extends the payroll tax cut for one year and renews aid for the unemployed, while cutting back the maximum length of jobless benefits from the current 99 weeks to 59.

The bill also allows states more flexibility in distributing unemployment assistance, permitting states to require those applying to submit to drug tests or show they are pursuing a high school degree, if they don't have one. The bill would also avoid a scheduled cut in pay for Medicare physicians for two years, a provision known as the "doc fix."

Explain it to me: Payroll tax cuts

To pay for the bill, GOP leaders use a series of spending cuts, including freezing pay for federal employees and members of Congress, eliminating a child tax credit for those in the U.S. illegally, and increasing Medicare premiums for those who earn more than $80,000 annually.

The pipeline issue is just one part of the problem for Senate Democrats who disagree with "central elements" of the GOP bill, including the length of the unemployment insurance extension and the proposed cost offsets.

Carney said Monday the spending cuts go deeper than levels agreed to in August in the deal negotiated by Congress and the White House to raise the federal debt ceiling.

He called the House GOP proposal on the payroll tax cut a "perfect example of the kind of chicanery you get in Washington, where your word is no longer your word a few months later for political expedience."

Sunday, two leading conservative Senate Republicans predicted Congress will agree to extend the payroll tax cut before it expires at the end of the year. The comments demonstrated the GOP shift on a proposal originally opposed by Republican leaders, even as each side continues trying to persuade the other of the best legislative approach to take.

Senate Minority Leader Mitch McConnell told "Fox News Sunday" the House Republican plan could get bipartisan support in both chambers. But South Carolina Sen. Lindsey Graham said he doubted a final bill would include the Keystone provision.

More on the pipeline showdown

"At the end of the day the payroll tax will get extended as it is now," Graham said on NBC's "Meet the Press," adding: "The pipeline's probably not going to sell."

Democrats led by Obama have been pushing for the payroll tax cut extension, with Republicans initially opposing the plan but now signing on. However, the parties are at loggerheads over how to pay for it as well as the political optics over who should get credit, as an election year approaches.

"It's the highest priority of the president and the Democrats in Congress," liberal Sen. Dick Durbin of Illinois told NBC.

The impasse sets up another countdown clock on congressional action, this time before the end-of-year holiday recess scheduled to begin at the end of next week.

As a way to garner support from reluctant conservative Republicans, who voiced concerns about the impact of the payroll tax cut on Social Security, GOP leaders insisted on keeping the provision aimed at moving toward approving the pipeline project within 60 days.

The House is expected to vote on the Republican bill Tuesday. In the meantime, Senate Democrats have begun working on a new bill of their own after Republicans blocked progress on previous proposals that included a surtax on income over $1 million.

"We'll find a way to pay for it in a bipartisan fashion," Graham said on NBC, adding that the "idea of taxing one group to pay for a tax cut for another is not going to sell."

Durbin complained that Republicans "have consistently said they will refuse to increase the taxes on the wealthiest people in America one penny, if that's what it takes to make sure that working families get a payroll tax cut."

Meanwhile, in the other big bill Congress needs to get done before funding expires, House Appropriations Chairman Hal Rogers told reporters off the House floor Monday that negotiators have worked out a deal on the year-end spending bill that wraps the nine remaining bills into one package.

The Kentucky Republican said there are some "policy riders" in the deal, but he declined to get into any specifics on which ones, saying he wanted the staff to finish writing the legislation before he talked about any details.

But Rogers said it is taking some time to "cross the Ts" so the bill would not be posted online Monday night, which puts off the House vote to Thursday at the earliest. The government runs out of money on Friday, December 16.

Rogers was confident the House would pass the bill, saying, "We'll get it done by the 16th."

House GOP leaders have pledged that bills need to be posted for three days before they can get a vote on the floor. Rogers said the nonpartisan Congressional Budget Office still needs to score the spending bill that some are calling the "megabus."

CNN's Ted Barrett and Deirdre Walsh contributed to this report.

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