Senate leaders hopeful spending deal can be worked out

As the holidays approach and the government runs out of money on Friday, lawmakers are still fighting over tax and spending issues that are keeping them in Washington -- the third such showdown this year.

At issue are two major pieces of legislation that have become intertwined. The first is a big omnibus spending bill -- around $1 trillion -- that will keep the government going. The second is a plan to extend the payroll-tax cut that Americans are enjoying, extend unemployment benefits that are much needed, and create a "doc fix" that will prevent big losses to doctors under Medicare.

The smart bet is that Congress might recess for the weekend but be back in session on Monday to finish their business, and could stay as late as Wednesday.

The maneuvering continued on Thursday, but there were some signs of optimism. Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., both waxed hopeful that a deal could be worked out in the coming days.

But there are still profound sticking points. While conferees from both parties and both chambers are within inches of an agreement on the spending bill, Democrats have refrained from signing the conference report in order to get more of what they want out of the payroll-tax bill. On Wednesday night, Republicans released the spending bill as it stands now and House Speaker John Boehner, R-Ohio, said on Thursday that he was considering bringing it to the floor for a vote.

"It's bicameral, bipartisan, and it's done," Boehner told reporters.

On the other hand, Boehner would probably need Democratic votes to pass the measure because of conservative dissent in his own conference. Whether House Minority Leader Nancy Pelosi, D-Calif., can keep all of her members from voting for it remains an open question. Earlier this week, 10 Democrats broke party ranks to support the GOP version of the payroll-tax cut extension that passed the House.

The thorniest issues remain the "riders" in the payroll-tax measure. Republicans want to force a decision on the Keystone XL energy pipeline from Canada to the U.S., which they support and many environmental groups oppose. They also want to see budget cuts used to offset the payroll-tax cut, while Democrats, at least for now, are still pushing their "millionaire surtax" to cover the cost. The payroll-tax cut expires at year's end and would hit the average American household with a $1,000 tax hike. Neither party wants that on their hands, but neither is prepared to concede just yet.

One wild card is the White House. Administration officials have urged the conferees to reopen the spending bill, but the lead Republican negotiator, Appropriations Committee Chairman Harold Rogers, R-Ky., is said to have formally objected. The White House was sidelined during much of the negotiations and it's likely it will swallow what comes in terms of spending.

On the payroll-tax cut, the White House has been coy about the Keystone deal. Officials have said they oppose it but they haven't explicitly said they will veto it. On Thursday, President Obama said, "Congress should not and cannot go on vacation before they are sure that working families won't see their taxes go up by a thousand dollars."

The millionaire surtax is the idea that seems the least likely to pass. "They never had the votes even when they controlled Congress in '09," Boehner said. But the House Republican hope of paying for the payroll-tax package by freezing government salaries also seems kaput. "They passed a bill that was doomed from the start," Pelosi said. "It's like someone saying to her fiancé: 'Yes, I'll finally marry you, but I can only do that on Feb. 30.' That day is never coming."

But Christmas is. And how close Congress wants to cut it is anybody's guess.

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