While a partial victory for President Barack Obama's year-end jobs agenda, the measure awaiting House approval next week contains a provision demanded by Republicans to pressure the White House into approving construction of a Canada-to-Texas oil pipeline that promises thousands of jobs.
Democratic and GOP leaders option for the short-term extension after failing to agree on big enough spending cuts to pay for a full-year renewal of the payroll tax cut. The 2 percentage point tax cut affects 160 million taxpayers. The weekly jobless payments average about $300 for millions of people who have been out of work for six months or more.
The measure was approved by an 89-10 vote during a Saturday session.
Votes were scheduled later Saturday on a $1 trillion-plus catchall spending measure setting the day-to-day budgets of 10 Cabinet agencies. The House cleared the spending bill Friday.
In a statement, White House communications director Dan Pfeiffer indicated Obama would sign the two-month extension measure, saying it had met his test of "preventing a tax increase on 160 million hardworking Americans" and avoiding damage to the economy recovery.
The House's approval Friday of the $1 trillion spending bill averted a government shutdown that otherwise would have begun Friday at midnight.
But a presumptive deal on a year-end package to extend the payroll-tax cut and unemployment benefits was more complex, and the two sides agreed to prolong it for just two months rather than a year because they couldn't agree on how to pay for it. Lawmakers on Capitol Hill are increasingly battle-weary after a year of brinkmanship and are ready to go home for the holidays.
The deal would extend for two months the current cut in the Social Security payroll tax for wage earners to 4.2%, from 6.2%. It also would continue for that time a program that provides up to 99 weeks of unemployment benefits. And it would adjust the Medicare payment formula so doctors participating in the health-care program for the elderly won't see a steep cut in payments.
Senators said they expected the House to approve the deal, but Speaker John Boehner (R., Ohio) hasn't been enthusiastic about extending the payroll-tax cut for only two months, and the chamber has proven unpredictable this year.
As a sweetener, Republicans won an accelerated timetable for approval of the Keystone XL oil pipeline from Canada to the Gulf Coast of Texas, which they touted as a big victory.
Some Democrats worried about the pipeline's environmental impact, and Mr. Obama, who had delayed a decision on it, strongly opposed accelerating the approval. But Republicans say the project would create jobs, and they made it clear they wouldn't give in.
"These people are nuts who think that we shouldn't put that pipeline in. My gosh, plus 20,000 jobs—are you kidding?" said Sen. Orrin Hatch (R., Utah).
But the White House said it is crucial to conduct the necessary health, safety, and environmental review before approving the deal, and the 60-day window provided in the deal isn't enough time for that, so the permit can't be approved.
"Despite the fact that it almost certainly leads to no permit being granted by the administration, the GOP insisted on including this provision," said a senior administration official.
White House Communications Director Dan Pfeiffer issued a statement Friday embracing the tentative agreement. "The President said that Congress cannot go home without preventing a tax increase on 160 million hardworking Americans, and the deal announced tonight meets that test," he said, calling it "a significant victory for the American people and the economy." Mr. Obama, he said, "urges Congress now to finish up their business for the American people."
Even if the measure clears Congress, the deal means lawmakers in two months will be once again debating the contentious issues surrounding the payroll-tax cut, including how to pay for it.
Democrats, stressing that they had wanted a longer-term deal, nonetheless said it would be politically advantageous for them to revisit the issue in February, since they favor the popular payroll-tax break while many Republicans oppose it.
Lawmakers in the end agreed only on one funding mechanism—an increase in the fees that Fannie Mae and Freddie Mac charge lenders.
Until late in the day Friday, leaders of both parties had been uncharacteristically upbeat. "We are making really good progress on being able to handle the issues that everybody knows are outstanding," said Senate Majority Leader Harry Reid (D., Nev.).
Democrats initially seemed to have the upper hand on the payroll bill, since they supported the popular tax break while many Republicans opposed it. But then Democrats refused to sign off on the spending bill unless Republicans agreed to a payroll-tax deal, and that allowed Republicans to accuse them of courting a government shutdown.
The 1,220-page spending bill includes funding for a broad swath of the government, from the Pentagon to major domestic agencies. It passed the House on a bipartisan vote of 296-121, with 86 Republicans and 35 Democrats voting against it.
Some Republicans voiced frustration that so many of their GOP colleagues vote against every spending bill because the cuts are never big enough. "We're a divided Congress, and you get what you can," said Rep. Jack Kingston (R., Ga.).
The final arguments over the spending bill concerned not spending levels but a handful of policy issues that seemed small-bore compared with the bill's vast scope.
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