Congressional stalemate sets up Christmastime government shutdown

Congress flirted Wednesday with yet another partial government shutdown — the third this year — as Democrats said they won’t allow a year-end funding bill to go through until lawmakers also pass an extension of this year’s payroll tax cut.

Late in the day, Democrats were reportedly preparing a new payroll tax-cut offer after forgoing their demand that any tax cuts be accompanied with tax increases on the wealthiest Americans. That had been their chief negotiation position since September, when President Obama insisted that tax increases be part of his jobs-stimulus package.

The new offer could be the breakthrough needed to end a stalemate, which now threatens continued funding for most of the government, payments to doctors to treat Medicare patients, more unemployment benefits for the long-term jobless, and the tax cut, which Mr. Obama said is worth an average of nearly $1,000 to 160 million taxpayers.

For most of the past two weeks, the two sides have been divided over how to pay for the tax cuts and over the Republican insistence that the bill also force the White House to make a decision on the Keystone XL pipeline, which would carry oil from Canada to the U.S.

Democrats have blocked action on the spending bill until the Republicans caved, but that appeared unlikely late Wednesday.

“The House has done its work. It’s time for the Senate to do theirs,” said House Speaker John A. Boehner, Ohio Republican, who called on Democrats to release the spending bill from the blockade. “We’ve got an agreement in a bipartisan way on the appropriations process to fund the government. There’s no reason for it to be held hostage to try to give leverage to one side or the other.”

Current government funding expires Friday. Those writing the replacement bill said it is ready to go, though Democratic leaders disputed that. Still, they acknowledged that it could be wrapped up speedily if all sides cooperated.

“I think we could complete it very quickly if people sat down and focused on what we need to do to get out of here,” said Senate Majority Leader Harry Reid, Nevada Democrat.

The stalemate and potential shutdown are a fitting cap to a year that has seen this scenario play out repeatedly. First, the two sides clashed over 2011 spending, averting a shutdown at the last moment when the Republicans dropped provisions that would have tied Mr. Obama’s hands on the environment and health care, and Democrats accepted tens of billions of dollars in spending cuts.

The two sides fought through the summer over raising the government’s debt ceiling. That was solved when they agreed to discretionary spending cuts over the next decade and then created a supercommittee to propose more cuts — with automatic cuts going into effect if the committee failed.

The committee did fail, but the discretionary spending numbers have held. They became the basis of the year-end spending bill that now hangs in limbo.

Mr. Boehner’s House Republicans have passed a bill that extends the 2 percentage-point payroll-tax cut into 2012, and coupled it with the Medicare, unemployment and pipeline provisions. They offset the bill’s costs by freezing federal workers’ salaries and slowing parts of the Democrats’ health care law.

Mr. Obama has vowed to veto that bill, saying the salary freeze would cut spending too deeply. Instead, he wants the bill to raise taxes on wealthy Americans.

But Senate Democrats have repeatedly tried and failed to get a tax-increase plan through their chamber, falling far short of the 60 votes needed to avert a filibuster.

On Wednesday, Sen. Charles E. Schumer, New York Democrat, said his party would consider dropping the tax increase idea.

“I’m not going to draw any lines in the sand,” he told reporters.

However, small overtures were overshadowed by the total stalemate on the Senate floor.

In a testy exchange, the only thing on which Mr. Reid and his Republican counterpart, Sen. Mitch McConnell of Kentucky, could agree was that neither one would not concede.

Mr. Reid tried to schedule a vote to kill the House payroll-tax bill, and Mr. McConnell objected. When Mr. McConnell tried to force action to ensure the spending bill comes before the payroll-tax bill, Mr. Reid intervened.

The two men, both masters of Senate procedure, even confused themselves as to whether they had left any pieces still standing — and objected just to make sure.

“We’ll both object, just for good measure. Bipartisan objection,” Mr. Reid said, drawing laughs.

That leaves a confusing standoff. With the House having already passed its payroll-tax-cut extension, the only major bill standing between it and adjournment is the year-end funding bill. If the House passes that, the representatives could leave town, forcing Senate Democrats into a take-it-or-leave-it position on the Republican tax bill.

So Democrats are refusing to sign off on the final details of the spending bill, which will force the House to remain in session. That means Democrats can insist on negotiating changes to the payroll-tax bill. Democrats want the Republicans to drop the pipeline provisions and contentious new rules restricting unemployment insurance.

By objecting to action Wednesday, Mr. McConnell is drawing out the process, making sure the House tax-cut bill can’t come to the floor under regular Senate rules until Saturday — a day after the spending bill needs to be completed.

With both sides playing a game of brinkmanship, Mr. Reid is counting on the Republicans to be blamed for any shutdown, saying the party has a history of pushing funding to the edge.

“Everyone can see very clearly my friends on the other side of the aisle want the government to shut down,” he said.

He proposed a short-term spending bill to fund the government through Wednesday, which he said would give all sides time to work out a payroll agreement.

That, too, marks a role reversal. Earlier this year, it was Republicans who were calling for a stopgap, while congressional Democrats and Mr. Obama said it was no way to run a government.