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US Congress inches to deal on payroll tax and pipeline US Congress strikes deal linking payroll tax to pipeline
(about 2 hours later)
The US Congress is close to a deal to extend payroll tax cuts and unemployment benefits for two months, according to congressional aides. US lawmakers have agreed to extend a payroll tax break for two months, after Republicans won their fight to attach a provision on a controversial pipeline.
But any bill, which would still have to pass both chambers, is expected to include a clause to speed up a decision on a much-disputed oil pipeline. Congress is to vote on Saturday on the bill, which will force the Obama administration to make a decision on the oil project early next year.
Negotiations progressed after the White House appeared to back away from a veto threat over a pipeline provision. Compromise was reached after the White House backed away from a threat to veto the pipeline clause.
Meanwhile, a nearly $1tn (£645bn) spending bill has passed the House.Meanwhile, a nearly $1tn (£645bn) spending bill has passed the House.
The Senate is expected to vote through that legislation later on Friday or Saturday, narrowly averting a shutdown of several federal government agencies. The Senate is expected to vote through that legislation later on Friday or Saturday, averting a shutdown of several federal government agencies.
Passage of these two pieces of legislation would end a year of bitter partisan budget battles in Congress. Passage of these two pieces of legislation would end a year of bitter partisan budget battles on Capitol Hill.
Democratic allies split
Democrats have been pushing for a one-year extension of a payroll tax cut, which is due to expire at the end of the year, that would help 160 million American workers.
After initial reluctance, Republicans agreed to back the $120bn plan on condition a deal include a decision on the Keystone XL oil pipeline from Canada to the US Gulf.
President Barack Obama threatened last week to veto any bill linked to the pipeline, but on Friday the White House softened its tone.
Republicans, who hold sway in the House of Representatives, had warned they would not pass any bill from the Democratic-controlled Senate without the pipeline provision.
Much to conservatives' delight, the row has split two core Democratic blocs - environmentalists, who vehemently oppose Keystone XL; and union leaders, who say it will bring much-needed jobs.
Mr Obama last month delayed a decision on the project until after November 2012's presidential election, prompting Republicans to say he was more concerned with his job than jobs for the American people.
The 1,700-mile (2,700-km) pipeline would run from western Canada through Montana, South Dakota, Nebraska, Kansas and Oklahoma to refineries in Texas.
Republicans and Democrats have been arguing over how to pay for the payroll tax cut.
Earlier this week, Democrats gave up pushing White House demands for a new surtax on millionaires to offset the cost, in the face of stiff Republican objections.
The deal reached on Friday night includes a 60-day deadline for a decision on Keystone XL.
The two-month package would also extend the payroll tax break, unemployment benefits and postpone deep cuts in Medicare fees to doctors.
Obama administration officials told US media on Friday night that the president would not veto the measure, but almost certainly refuse a permit for the pipeline.
The US state department warned on Monday that two months would not be enough time to approve the project without violating environmental laws.
Correspondents say the Obama administration can simply deny approval in early 2012 and go back to its original plan of delaying a final decision, pending the study of an alternative route.