Congress reaches deal to avoid government shutdown

WASHINGTON -- Congress has reached an agreement to fund the federal government through Sept. 30 of next year — avoiding a government shutdown at midnight Friday — and was considering a deal for a short-term extension of a payroll tax cut and unemployment benefits to American workers.

While a final deal on the payroll package continued to elude negotiators on Thursday, congressional leaders struck a less partisan tone than in days before and expressed optimism that a deal could be reached.

"We hope that we can come up with something that would get us out of here at a reasonable time in the next few days," said Senate Majority Leader Harry Reid, D-Nev.

His counterpart, Senate Minority Leader Mitch McConnell, R-Ky., agreed. "We're confident and optimistic we'll be able to resolve both on a bipartisan basis," he said.

The spending package bundles together nine appropriations bills totaling $915 billion and funds the government through the end of the fiscal year.

Lawmakers agreed to the measure, but it was delayed due to White House objections to two provisions in the bill: to reinstate travel restrictions to Cuba that President Obama has eased, and funding cuts to the Commodity Futures Trading Commission, undercutting the Obama administration's efforts to increase oversight of Wall Street.

The negotiations on a bill to extend the Social Security payroll tax cut and federal unemployment benefits focus on two points of contention between the parties over the creation of an oil pipeline from Canada to Texas and how to pay for the estimated $202 billion cost to extend the tax cut from 6.2% to 4.2% for 160 million Americans, as well as extend federal unemployment benefits for one year.

Both are set to expire Dec. 31. As of late Thursday, congressional leaders were discussing a short-term $40 billion deal for a two-month extension of the payroll tax cut and unemployment benefits in order to buy Congress more time to negotiate how to pay for the measures through the end of 2012.

Talks are focused in the Senate because House Republicans have already approved their bill, which expedites the Keystone XL oil pipeline and creates approximately 20,000 new jobs, according to GOP estimates.

Obama and congressional Democrats say the project needs more time for environmental review, but Republicans were holding their ground to include it in the final bill.

"It's the most important private-sector job creating project in America and it's ready to go," McConnell said.

Democrats have abandoned their efforts to include a tax increase for Americans earning more than $1 million annually. Pelosi said Democrats will try again next year.

"This is not the last bill that will ever be passed," she said.

House Speaker John Boehner, R-Ohio, said that if Congress can approve legislation to fund the government, he would send House lawmakers home until the Senate can deliver a payroll tax cut package that can pass the House and be signed by the president.

"There's no reason for House members to sit around here," Boehner said, pledging to call lawmakers back to Washington to vote on a final bill if necessary.

"If the Senate acts, I'm committed to bringing the House back, and we can do it within 24 hours," he said.