Will the payroll tax fight shut down the government?

Democrats and Republicans reach a risky impasse over a popular tax break. And the clock is ticking

Senate Majority Leader Sen. Harry Reid
(Image credit: Alex Wong/Getty Images)

Once again, the threat of a government shutdown is hanging over Washington. Without a new spending package — Democrats are pushing a $1 trillion omnibus bill — current stopgap funding will run out on Friday. Democrats have insisted that a new spending bill will be stalled until the GOP agrees to extend the popular payroll-tax holiday through 2012. The Republican-controlled House did vote on Wednesday to extend the payroll tax cut, but Democratic leaders say the GOP bill is "dead on arrival" in the Senate. That's because the GOP tacked a provision onto its bill demanding that the controversial Keystone XL oil pipeline project go forward, and because the GOP wants to pay for the $119 billion package with increased Medicare premiums instead of a surtax on people with incomes over $1 million. Will the two sides compromise, or let the government shut down?

Both parties are stubborn enough to do it: "In theory, the House-approved bill clears the way for the two sides to compromise" and approve the tax-cut extension on time, says Mary Milliken at Reuters. It's clear both parties "want to give the boost to voters and the fragile American economy." But the "elaborate political theater" underway on Capitol Hill makes it appear that "cooler heads" might not prevail in time to avoid a shutdown.

"Washington Extra — Theater of the absurd"

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It's Democrats who need to see reason: Obama ran around urging an extension of the payroll tax holiday by "telling Republicans not to be Grinch," says The Lonely Conservative. Well, the GOP "caved." In return, Republicans are merely asking for the job-creating Keystone pipeline and a vow not to increase taxes. It's Democrats who are holding the Capitol hostage. The only way to avoid disaster is for Senate Majority Leader Harry Reid to give up on his "nasty little political game of chicken."

"Obama says he'll veto GOP tax bill, but he probably won't have to thanks to Harry Reid"

The government won't shut down... at least not on Friday: Remember, says Brian Beutler at Talking Points Memo, before a shutdown, Congress can always just pass short-term spending bills to buy time. House Republicans thought they could send the Senate a bill "larded up with GOP goodies" and then skip town, forcing Senate Democrats to "swallow their bill whole" or let the tax break expire. But now that the payroll tax extension is tied to a possible shutdown, Republicans might just stick around and "deal in good faith."

"Dems to GOP: Deal fairly on payroll tax or shut down the government"

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