Washington (CNN) — The Senate on Saturday voted to extend the payroll tax cut by two months, after both sides were unable to reach a comprehensive agreement to extend the payroll tax cut and unemployment benefits for a full year.
The deal, passed in a 89-10 vote, includes a provision to speed up a decision on the Keystone XL pipeline, giving the Obama administration 60 days to make a call on the project.
The plan was discussed with Senate caucuses of both parties in separate meetings Friday evening. The House still has to vote on the measure.
The impasse involved how to pay for the programs for a full year, a Democratic source and a Republican source said. However, the two-month extension would be fully paid for, according to the sources.
Senate Majority Leader Harry Reid, D-Nevada, said Democrats supported the proposed two-month deal because “that was the best we could get,” as it was important to preserve the payroll tax break — even temporarily.
“Democrats have worked tirelessly to prevent a thousand-dollar tax increase on middle-class families,” he said.
Failure to pass the payroll tax measure — a major part of Obama’s job-creation plan — would cost working Americans an average of $1,000 in higher taxes next year.
The White House issued a statement after news of the two-month proposal broke Friday, lauding the agreement despite the inclusion of the pipeline provision — something the president has said he would reject.
“This is an important step towards enacting a key provision of the president’s American Jobs Act and a significant victory for the American people and the economy, because as independent analysts have said, failing to extend this tax cut would have had a damaging effect on our recovery and job growth,” said the statement issued by White House spokesman Dan Pfeiffer. “The president urges Congress now to finish up their business for the American people.”
A senior administration official noted that though the president has said he would reject any attempt to “mandate” construction of the pipeline before it receives further review, the Keystone provision Senate leaders have agreed to speeds up the approval process — giving the administration 60 days to make a decision — but does not mandate construction.
When asked about the apparent contradiction by the president over the pipeline provision, another senior administration official said the president’s top priority is making sure taxes don’t go up on January 1.
In the Senate, the payroll tax measure has faced an impasse over specific provisions sought by each party.
Senate Democrats proposed a new tax on income of more than $1 million to help pay for the lower payroll tax rate for another year, but Republicans have blocked the plan from proceeding on two occasions.
Meanwhile, House Republicans pushed through their own version of a payroll tax measure this week that included the Keystone pipeline provision.
The Obama administration has delayed until 2013 a decision on the pipeline that would transport oil from Canada’s tar sands production facilities in northern Alberta to refineries on the Gulf Coast of Texas.
GOP Senate Minority Leader Mitch McConnell said he had “no idea why (the pipeline) could be called controversial.”
“The labor unions like it. Many Democrats want it,” he added. “It strengthens our national security by decreasing amount of oil we get from unfriendly countries. And it wouldn’t cost the tax payers a dime.”
The delay followed complaints by environmentalists and Nebraska officials that the pipeline route could threaten that state’s Sandhills region and vital Ogallala aquifer. Alternate routes are being considered, and Nebraska officials as well as the pipeline company, TransCanada, acknowledge that the process of approving a final route will last into the second half of 2012.
Republicans, who traditionally back the oil industry, accuse Obama of delaying the issue until after his re-election bid next year for political reasons. Labor unions that usually support Democrats back the pipeline project, while environmentalists who are also allied with the political left oppose it.
The State Department, which has final authority to approve the oil pipeline, has warned that a shortened deadline for approving the project would leave insufficient time to assess the route alteration.
A Senate Democratic leadership aide said a two-month payroll tax-cut extension would set up further negotiations on a larger deal.
But House Speaker John Boehner, R-Ohio, said Friday that any attempt for a short-term extension of the payroll tax cut and unemployment benefits would be altered in the House.
The recent legislative maneuvering was a last-gasp bid to end weeks of political wrangling that threatened a partial government shutdown and raised public frustration with Congress even further.
A poll released Thursday by the Pew Research Center for the People and the Press showed public discontent with Congress at record levels, with two-thirds of voters saying most lawmakers should be voted out of office next year.