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Senate OKs payroll tax cut, huge spending bill

By Alan Fram

Associated Press

Published: Saturday, Dec. 17 2011 2:21 p.m. MST

President Barack Obama delivers a statement in the Brady Press Briefing Room at the White House in Washington, Saturday, Dec. 17, 2011 following the Senate vote to approve legislation extending a Social Security payroll tax cut and long-term jobless benefits for two months.

Manuel Balce Ceneta, Associated Press

WASHINGTON — The Senate voted Saturday to temporarily avert a Jan. 1 payroll tax increase and benefit cutoff for the long-time unemployed, but forcing a reluctant President Barack Obama to make an election-year choice between unions and environmentalists over whether to build an oil pipeline through the heart of the country.

With the still-reeling economy serving as a backdrop, the Senate's 89-10 vote belied a tortuous battle between Democrats and Republicans that produced the compromise two-month extension of the expiring tax breaks and jobless benefits and forestalled cuts in doctors' Medicare reimbursements.

It also capped a year of divided government marked by raucous partisan fights that tumbled to the brink of a first-ever U.S. default and three federal shutdowns, only to see eleventh-hour deals emerge. It ensured that the two sides would revisit the payroll tax cut early next year as the fights for control of the White House and Congress heat up.

By 67-32, senators gave final congressional approval to a separate $1 trillion bill financing the Pentagon and scores of other federal agencies through next September. That measure avoided a shuttering of government offices that otherwise would have occurred this weekend when temporary financing expired.

The tax legislation delivers tax cuts and jobless benefits that some Republicans opposed. It also represents a rebuff of Obama's original demands for a yearlong payroll tax reduction for 160 million workers that was to be even deeper than this year's cut, extended to employers and paid for by boosting taxes on the highest-earning Americans.

The measure's $33 billion price tag will be paid for instead by raising fees that government-backed Fannie Mae and Freddie Mac will charge to back new mortgages or refinancings, beginning next year. When fully phased in, those increases could cost a person with a $200,000 mortgage about $17 a month.

Despite the changes, Obama praised the Senate for passing the bill and prodded the Republican-run House to give it final approval in a vote expected early next week. He exhorted lawmakers to extend the tax cuts and jobless aid for the entire year, saying it would be "inexcusable" not to.

"It should be a formality, and hopefully it's done with as little drama as possible when they get back in January" from their holiday recess, he said.

Senate Republicans voted 39-7 in favor of the payroll tax measure, suggesting that many House GOP lawmakers might also back it. Of the 51 Senate Democrats and two independents who usually side with them, only three voted "no."

The Senate adjourned for the year after its votes Saturday.

While Obama and Democrats used the fight to portray themselves as defenders of beleaguered middle- and lower-income people, Republicans used it to cast themselves as champions of job creation.

Headlining that was a provision they inserted forcing Obama to make a decision within two months on whether to allow construction of the proposed 1,700-mile Keystone XL pipeline, which is to deliver up to 700,000 barrels of oil daily from tar sands in Alberta, Canada, to refineries in Texas. The language requires him to issue the needed permit unless he declares the pipeline would not serve the national interest.

Unions have clamored for the thousands of jobs the project could create. Environmentalists have decried the huge amounts of energy it would take to extract the oil. Obama originally announced he was delaying a decision until 2013, which would have allowed him to avoid choosing between two Democratic constituencies before Election Day next November.

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