In it, but not of it. TPM DC

Shutdown Averted As Dem, GOP Leaders Hash Out Payroll Tax Deal

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Newscom

With the millionaire surtax gone, most of the cost of the bill will likely be paid for with budget cuts agreed to in Super Committee negotiations, which ultimately failed. To make up the difference, Democrats are insisting that the GOP abandon other, conservative payfors, such as greater means-testing in Medicare. Instead, they're pushing Republicans to accept ideas like ending a tax benefit for corporate jet owners, and counting war savings toward the cost of the bill.

But it's an expensive bill. Many of the payfors are contentions. And as a fall back, negotiators are kicking around the idea of extending the payroll cut and unemployment benefits for two months, and dealing with the rest of the year after Congress returns from holiday recess. Republicans aren't as keen on this backstop as Democrats are, but it would prevent a temporary lapse in benefits while negotiators look for acceptable payfors under less heated circumstances.

Outside the payfors, Republicans are still pushing hard for a rider that would force the Obama administration to make a swift decision on the construction of the Keystone XL oil pipeline. Democrats, both on the Hill and at the White House, are softening their opposition to this demand. But it's a tough call for Republicans as well. For them it's a choice between embarrassing the Democrats and winning the politics and actually assuring that the pipeline gets built. The State Department, which holds the keys to the pipeline, insists that rushing the project will compromise their ability to conduct adequate study of the project and sign off on it.