GOP Looks At Keystone Pipeline to Move Payroll Tax Cuts Forward

Stung by Senate rebellion, House GOP looks for options to lock in a payroll tax cut extension.

By + More

Facing a growing rebellion among its own party members over an extension of the payroll tax cut, Republicans are searching for ways to pass the tax relief before going home for the holiday break. After more than half of the Senate GOP caucus voted against a Republican proposal to pay for a tax cut extension, House Republican leaders met with restless members of their party to look at options—including pairing the payroll tax cut extension with legislation to move forward with the controversial Keystone XL oil pipeline from Canada, according to a GOP aide.

[U.S. News & World Report Debate Club: Should the payroll tax cuts be extended?]

The aide says that was only one of many ideas which Republicans are floating as the deadline to pass an extension nears expiration.

Keystone XL, a proposed pipeline running from Canada to Texas, has been pushed by TransCanada Corp but is bitterly opposed by environmental activists. After the Obama administration delayed a decision about whether or not to allow its construction, it has turned into a rallying cry among Republicans who claim it's another example of the White House stifling job creation through regulations. It could be the latest bargaining chip in the negotiations over whether, or how, to continue the 2 percentage point payroll tax cut which Congress passed in late 2010 and is due to expire at the end of the year.

Thursday night, a GOP proposal which would have paid for the tax cut extension by freezing the pay of federal workers for three more years and making millionaires pay for Medicare was defeated. Observers were surprised that 26 Republicans, including many in leadership, voted against extending the cuts.

"These proposals would turn a one-time tax holiday into a long-term raid on Social Security funding, threatening its solvency," said Tennessee Sen. Lamar Alexander, chairman of the Republican Senate Conference.

Arizona Sen. Jon Kyl, the second-ranking Republican in the Senate, also voted against the proposal. Another Republican defector, Illinois Sen. Mark Kirk, claimed that it was unwise to chip away at Social Security's funding source, even if only temporary.

"We cannot run Social Security benefit programs without contributions," Kirk says. "In these tough economic times, you do not want seniors worry about this, too." A Democratic proposal which paid for the extension with an income tax hike on millionaires received a majority of votes, with Maine Republican Sen. Susan Collins voting in favor, but failed to overcome a Republican filibuster.

[Former pol: Americans need to speak up about paralyzed Congress.]

Democrats are gleefully highlighting the mass defections on the GOP side.

"All [Senate Minority Leader Mitch] McConnell's hard work trying to convince us that Republicans support tax cuts for the middle class went down the drain tonight," wrote Adam Jentleson, spokesman for Majority Leader Harry Reid, on Twitter.