Speaker of the House John Boehner with Majority Whip Kevin McCarthy and House Majority Leader Eric Cantor. The Republican bill includes certain ‘sweeteners’ to attract sufficient votes. Image Credit: AP

Washington: US Republican and Democratic lawmakers are locked in an end-of-year fight that threatens a government shutdown, an effective tax hike for 160 million Americans and the loss of benefits for millions of unemployed.

With just days left to resolve the crisis, both parties traded recriminations on Tuesday even as they tried to out-manoeuvre each other for political advantage in a high-stakes battle that will likely carry over into the 2012 elections.

At the centre of the drama are efforts to extend aid to the long-term unemployed and a payroll tax cut for Americans that some economists say will boost the country's fragile economic recovery, and a massive spending bill that will keep the government operating beyond tomorrow.


Americans and investors have watched with dismay this year as Republicans and Democrats have been unable to bridge a deep ideological divide over taxes and spending, bringing the government to the brink of a shutdown in April and costing the United States its coveted AAA credit rating in August.

Both parties appeared to have reached broad agreement on the roughly $1 trillion (Dh3.67 trillion) spending bill on Monday night in a rare display of bipartisanship, but on Tuesday, Democrats backpedalled, saying major issues were still unresolved.

Democrats fear that Rep-ublicans in the House of Representatives will pass the spending bill and their own version of a payroll tax cut bill and then head home for the holidays.

That would effectively foist the Republican measure on the Democratic-controlled Senate.

President Barack Obama called Senate Majority Leader Harry Reid, a fellow Democrat, at the weekend, urging him not to let Congress pass the spending bill and go on holiday before agreement was reached on extending the payroll tax cut and unemployment benefits.

"What we simply cannot allow is Republicans to take care of the spending bill and leave town because the absolute effect of that will be a tax hike for middle-class Americans," White House spokesman Jay Carney said. "That's just not acceptable."

Lawmakers emerging from a closed-door meeting of House Republicans accused Democrats of holding the spending bill "hostage."

Republican leaders said they did not yet have the 218 votes needed to get the bill through the 435-member chamber but they were confident they would get them by time voting started.

"It will pass," predicted House Republican Whip Kevin McCarthy, who was responsible for rounding up votes in the chamber prior to Tuesday's vote. Republican lawmakers have been deeply divided over extending the payroll tax cut. Many rank-and-file members are sceptical that it has boosted job creation and stimulated the economy.

Republican leaders, including Speaker John Boehner and the top Republican in the Senate, Mitch McConnell, however fear a backlash from voters in 2012 if the tax cut is allowed to expire.

The Republican bill includes certain "sweeteners" to attract sufficient votes, including a controversial measure that would speed up a decision by Obama on the Canada-to-Texas Keystone XL oil pipeline.

Decision delayed

Obama has delayed a decision on the pipeline until 2013 amid an outcry from environmentalists, a key constituency.

While Democrats have sought to paint Republicans as the party of the rich for their reluctance to embrace the payroll tax cuts, Republicans have countered that the Keystone project would create tens of thousands of jobs.

"The president says the American people can't wait for jobs," Boehner told reporters. "Clearly if we pass this bill today, we will be taking the first big step toward creating jobs in America and it will be time for the Senate to act." The White House said if the Republican bill made it to Obama's desk, he would veto it.