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Originally published December 14, 2011 at 8:53 PM | Page modified December 15, 2011 at 8:21 AM

Payroll-tax-cut skirmish could shut down government as soon as this weekend

A partisan standoff in Congress over President Obama's payroll-tax cut for 160 million working Americans threatens a partial shutdown of the federal government as soon as this weekend, leaving lawmakers to finish the year heading toward another budget crisis.

Tribune Washington bureau

The day in D.C.

Military spending: The House passed a $662 billion defense bill late Wednesday after last-minute changes ensured President Obama's ability to prosecute terrorist suspects in the civilian justice system. The measure sets policy for military personnel, weapons systems and the wars in Iraq and Afghanistan, plus national-security programs in the Energy Department. The measure passed, 283-136, with a final vote expected Thursday in the Senate.

Labor board: President Obama announced plans to nominate two Democrats to the National Labor Relations Board: Sharon Block, deputy secretary for congressional affairs at the Labor Department, and Richard Griffin, currently the general counsel for the International Union of Operating Engineers, to fill two vacancies. Republicans have threatened to block any appointments to the agency.

Seattle Times news services

quotes Shut it down now! The best way to get out of debt is to stop spending money. Read more
quotes More astoundling irresponsible reporting. FY2012 budgets for many federal agencies... Read more
quotes Shut it down. When Congress grows up we can get it going again. Or not. Read more

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WASHINGTON — A partisan standoff in Congress over President Obama's payroll-tax cut for 160 million working Americans threatens a partial shutdown of the federal government as soon as this weekend, leaving lawmakers to finish the year heading toward another budget crisis.

A must-pass bill to keep the government running has become tangled in the politics of continuing the payroll-tax break, which shaves workers' Social Security tax from 6.2 percent to 4.2 percent. If the tax cut is allowed to lapse after Dec. 31, workers would have to pay an extra $1,000 a year, on average.

Senate Majority Leader Harry Reid, D-Nev., and other Democrats met with Obama on Wednesday at the White House as House Speaker John Boehner, R-Ohio, convened rank-and-file Republicans behind closed doors, with both sides searching for a solution.

Democrats are considering dropping their plan to impose a surtax on millionaires to pay for the payroll-tax cut, a concession that had been considered likely. Republicans had rejected the millionaire surtax, so if Democrats retreat, a compromise could emerge. Republicans also want the $120 billion cost of the payroll-tax break to be covered mainly by cuts, including reducing unemployment benefits and freezing federal workers' pay.

An Obama administration aide said the millionaires' surtax is up in the air. "It's being discussed," the aide said.

The stalemate hardened this week as the Republican-led House approved a package that keeps the payroll-tax break for 2012, but loaded the bill with Republican priorities.

Senate Democrats say the Republican add-ons are unacceptable, and Obama administration officials said Obama would veto it.

The add-ons include a reduction in unemployment benefits, new rules that could require the unemployed to take drug tests and enroll in GED programs to receive benefits, and the delay of new regulations on boiler emissions.

The GOP provisions also include an extension of a pay freeze for federal workers and higher Medicare premiums for upper-income seniors. And the two sides are clashing over a provision that would force a decision on a construction permit for the Keystone XL pipeline within 60 days. The State Department, which is reviewing the pipeline issue, has said that if forced to make a decision so quickly, it would have to deny the permit.

According to a Democratic analysis, the House Republican bill would reduce unemployment benefits by 40 weeks in 21 states plus the District of Columbia: Alabama, California, Connecticut, Florida, Georgia, Illinois, Idaho, Indiana, Kentucky, Michigan, Missouri, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Texas and Washington.

Most of the Republican provisions make the bill dead on arrival in the Senate, where Democrats hold the majority.

To apply leverage and prevent the House from heading home for the holidays, Democrats blocked the unrelated $1 trillion spending bill to keep the government running. They say it contains unresolved side issues.

Federal workers are preparing for a shutdown, saying they would have to go without pay over the holidays. Boehner wants to avoid blame by pushing a version of the bill through the House by Friday, when most government offices would run out of money at midnight.

Material from The Washington Post and The Associated Press is included in this report.

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