House approves payroll tax cut extension, but...

The approval of the payroll tax cut extension seems encouraging for some 160 million Americans, including a large percentage of Floridians. Extending the existing payroll tax cuts (Social Security and Medicare deductions) also means continuing to take home an average additional $1,000 annually. That's no peanuts in difficult economic times.

However, there's the "but." The bill remains at a standstill since Democrats refuse conditions congressional Republicans have included, such as tying approval of the Keystone XL oil pipeline to the payroll-tax extension. They argue that the construction of the pipeline from Alberta, Canada to the U.S. will create thousands of jobs, and substantially increase domestic oil supply. If the bill isn't approved before the Congress goes on recess, the payroll taxes of millions of Americans will increase, effective January 1, 2012.

President Obama, congressional Democrats, and the U.S. State Department, however, want time (until 2013) to study the pipeline project to access potential damage to the environment. Environmental groups fear the pipeline could create harmful oil spills and lock the U.S. into dependency on oil sands, considered an environmentally dirtier form of oil production. Democrats say they refuse to be railroaded into approving the project as part of the payroll extension bill, which will almost certainly to be rejected when it gets to the Democratic-led Senate. Even if passed by the Senate, the president has vowed publicly to veto it.

This payroll tax bill is also tied to a government spending bill. With congressional members due to take their Christmas recess on Friday, the likely rejection of the bill by the Senate signals another serious deadlock in Congress, leading to an impasse that may result in the government running out of funds after Friday.

President Obama and Senate majority Leader Harry Reid have indicated that Congress must not go to recess before extending the payroll cuts. Yet, in the current showdown atmosphere of Washington, will these instructions be heeded? This stalemate remains strong, with Republicans arguing that their oil pipeline proposal satisfies President Obama's push for job creation, while Democrats insist that payroll taxes be extended without pipeline's approval.

Senate Republican leader Mitch McConnell has preempted the likely rejection of the payroll extension/Keystone pipeline bill by Senate Democrats as a threat to delay action on the Congressional spending plan until a compromise is reached, and warned that this could cause a government shutdown after Friday. However, the White House, Democratic congressional leaders and representatives remain adamant that the pipeline provision is a no-go.

Resolving the attachment of the pipeline issue isn't the only measure that could jeopardize the passage of the payroll extension bills. Democrats also oppose the bill giving states more flexibility in provision of unemployment benefits, which would possibly make some beneficiaries subject to drug tests, make a high school diploma a requirement, and reduce the length of unemployment benefits from 99 to 55 weeks.

The proposed spending bill associated with the payroll tax extension includes a pay freeze for federal employees and congressional representatives, and an increase in Medicare premiums for people earning more than $80,000 annually.

To avoid a possible government shutdown, Congress could potentially approve a short-term extension of payroll tax cuts and unemployment benefits and revisit the bill early in 2012.

After all, most congressional representatives want to be home for the holidays.