WASHINGTON — Congressional negotiators reached agreement Thursday on a compromise spending bill to avert a weekend federal shutdown. They also worked toward a deal renewing the payroll tax cut and unemployment benefits for another year but prepared a shorter version as a fallback.
Senate Majority Leader Harry Reid, D-Nev., told reporters he was still optimistic that bipartisan talks on yearlong extensions of the Social Security payroll tax cut and unemployment coverage would succeed. But as a "Plan B," he said, they were working on a two-month extension as well, which would also prevent cuts in Medicare reimbursements for doctors during that period.
"We're still working on the long-term" bill, Reid told reporters as he exited the Capitol after a day of talks over both the payroll tax and spending measures. As for the two-month version, he said, "We'll only do that if what we're working on doesn't work out."
Reid's remarks put a slight damper on a day on which for the first time, Democratic and Republican leaders expressed optimism at prospects for swift compromise on their payroll tax standoff and a spending battle that had threatened to shutter federal agencies beginning at midnight Friday.
A deal on a $1 trillion spending bill was reached after Republicans agreed to drop language that would have blocked President Barack Obama's liberalized rules on people who visit and send money to relatives in Cuba. But a GOP provision will stay in the bill thwarting an Obama administration rule on energy efficiency standards that critics argued would make it hard for people to purchase inexpensive incandescent light bulbs.
The House is expected to approve the spending measure Friday, and the Senate could follow suit, possibly the same day.
Donald Stewart, spokesman for Senate Minority Leader Mitch McConnell, R-Ky., said talks aimed at agreeing to a yearlong extension of the payroll tax measure will continue.
"We're 12 hours into this debate, they just started talking," he said when asked about the two-month version of the bill. "I wouldn't hit the panic button."
A senior White House official said the administration supported the two-month plan.
Bargainers were considering the two-month extension of this year's payroll tax cut and unemployment benefits bill because so far, they haven't agreed how a yearlong extension would be paid for, said a Democratic aide who spoke on condition of anonymity to discuss the private talks.
The two-month bill would cost $40 billion, according to the aide. It would be paid for from a list of around $120 billion in savings that bargainers are considering, including sales of the broadcast spectrum and raising fees that Fannie Mae and Freddie Mac charge to back mortgages, the aide said.
The two-month extension would let lawmakers revisit the measure after returning to Washington after the holiday season. That could be risky because that work would come well into the 2012 presidential and congressional election year.
Without congressional action, the payroll taxes would rise and extra benefits for the long-term unemployed would expire on Jan. 1. Doctors' Medicare payments would be automatically reduced that day by 27 percent, a reduction that could prompt some to stop seeing Medicare patients.
"Right now, Congress needs to make sure that 160 million working Americans don't see their taxes go up on Jan. 1," said Obama, referring to the tax cut extension at the core of the jobs program he outlined in a nationally televised speech three months ago.
House Speaker John Boehner of Ohio, the most powerful Republican in an era of divided government, agreed. "We can extend payroll tax relief for American workers, help create new jobs and keep the government running. And frankly, we can do it in a bipartisan way," he said.
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