Keystone pipeline still a sticking point in payroll tax talks

House Speaker John Boehner of Ohio, second from left, briefs reporters after lawmakers from both political parties came together on an 11th-hour deal to keep the government from shutting down, Friday, Dec. 16, 2011, on Capitol Hill in Washington. From left are, Rep. Jeb Hensarling, R-Texas, Boehner, House Majority Whip Kevin McCarthy of Calif., and Rep. Peter Roskam, R-Ill.
AP Photo/J. Scott Applewhite
John Boehner
AP Photo/J. Scott Applewhite

Updated at 5:45 p.m ET

Congress is on track to pass a budget bill and avoid a government shutdown, but Republicans and Democrats are still horse trading over a bill to extend the payroll tax cut.

Leaders in the Senate have floated the idea of passing a short, two-month extension of the tax cut, but if that happens, House Republicans say they'll insist on keeping a controversial provision expediting the review of the Keystone XL oil pipeline.

"These rumors that are floating around here about a two-month extension, I'll just say this," Boehner said today. "If that bill comes over to us we will make changes to it, and I will guarantee you that the Keystone Pipeline will be in there when it goes back to the United States Senate."

Later on the Senate floor, Senate Republican Leader Mitch McConnell also said he couldn't support a payroll tax cut extension without the pipeline provision.

"There's bipartisan support for this project, and we need to get it done. We need to get it done now," McConnell said. "Frankly, I will not be able to support a package that doesn't include the pipeline."

McConnell said the president shouldn't "let a few radical environmentalists stand in the way" of a job-creating project.

If the payroll tax cut isn't extended by January 1, 160 million Americans would see their Social Security payroll tax rate jump from 4.2 percent back to 6.2 percent.

The House passed a bill this week extending the tax cut, but it included a number of measures that Democrats object to. One main concern was the provision forcing President Obama to make a quick decision on the Keystone oil pipeline, which would run from Canada to Texas. Democrats also objected to the ways Republicans intended to pay for the tax cut extension.

Some members have reportedly brought up the possibility of passing a two-month extension while the parties work out their differences, but a senior aide for Boehner said the speaker wants a year extension, CBS News Capitol Hill producer Jill Jackson reports, and thinks there is plenty of time to resolve this before the end of the year.

Members of the House are expected to leave town for the weekend now that they have passed a $1 trillion budget bill to keep the government running. The Senate is expected to pass that bill Saturday. Boehner today noted that "this will mark for the second year in a row that we will spend less money on the operation of our government -- two consecutive years that we've cut spending."

The House is expected to return to Washington once the Senate passes a payroll tax cut bill that could pass in the House.

Senate Majority Leader Harry Reid and Senate Republican Leader Mitch McConnell today both said they were making progress in the negotiations.

"We're making really good progress on being able to handle the issues that everyone knows are outstanding," Reid said. "We're not there yet. But we're very very close."

Added McConnell, "The majority leader and I are making significant progress and reaching an agreement on a package that will have bipartisan support, I hope."

According to a senior Democratic aide, negotiations are ongoing, CBS News Capitol Hill producer John Nolen reports. Democrats have given up on paying for the bill with a surtax on millionaires, but lawmakers are still looking at curbing tax breaks that very wealthy Americans are eligible for.