Senate Approves 2-Month Extension on Payroll Tax Cut

[UPDATE] 12/17/11 10:58 a.m.

The Senate voted to extend a payroll tax cut for two months and accelerate the decision process for the construction of an oil pipeline from Canada to the Gulf Coast.

The legislation was approved 89-10 Saturday morning. It now heads to the House of Representatives.

[This is a breaking news update. Check CP's earlier story below]

Senate leaders on Friday tentatively agreed to extend a payroll tax cut for two months and accelerate the decision process for the construction of an oil pipeline from Canada to the Gulf Coast. The deal is scheduled for a Senate vote early Saturday.

With the tax cut and Keystone XL pipeline issues resolved for the time being, approval of a spending measure to avert a government shutdown can also be expected in the Senate. The House on Friday voted 296 to 121 to approve a $1 trillion spending bill to keep the government funded through Sept. 30. The Senate is expected to approve it Saturday.

The tax cut agreement was a compromise deal. Republicans agreed to President Barack Obama’s call for the extension of the tax cut on condition that the White House would accelerate the decision on the pipeline, which GOP leaders say would create jobs and promote energy independence.

If the middle class payroll tax cut deal is passed by the Senate, jobless workers will also continue to receive unemployment insurance benefits, and fees paid to doctors for treating Medicare patients will not be cut or increased, for two months. The two-month package is estimated to cost about $40 billion.

Obama was seeking a yearlong extension for payroll tax cuts, but the two-month extension is also being hailed as a victory.

“The president said that Congress cannot go home without preventing a tax increase on 160 million hardworking Americans, and the deal announced tonight meets that test,” said White House Communications Director Dan Pfeiffer. “This is an important step towards enacting a key provision of the president’s American Jobs Act and a significant victory for the American people and the economy.”

While the Senate will vote on the deal Saturday, the House will take it up next week.

Republicans also saw the deal as a victory, as it compels the White House to decide on the 1,700-mile-long pipeline project before the next government is formed following the 2012 election. The State Department had planned to delay a decision on the pipeline until 2013, and Obama had threatened to veto any measure that was tied to the pipeline project.

“This bill will stop President Obama’s delaying tactics,” Sen. Richard Lugar from Indiana said in a statement. “This is a tremendous victory for our security and for creating jobs. It is absolutely incredible that President Obama wants to delay a decision until after the 2012 elections apparently in fear of offending a part of his political base and even risking the ire of construction unions who strongly support the project.”

Democrats are likely to continue to press for a larger deal.

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