Lawmakers grow confident deal will be reached by weekend

Optimism is growing that lawmakers will reach a deal in the next day or two on taxes and spending that would allow Congress to leave for the year this weekend.

Senators in both parties said they are growing more confident that a deal to extend the payroll-tax holiday and fund the government in 2012 will soon be reached.

Sen. Lisa Murkowski (R-Alaska) said she has booked flights to her home state on Friday and Saturday and would look into making a reservation on Sunday, too.

{mosads}Sens. John Cornyn (R-Texas) and Claire McCaskill (D-Mo.) said they expected a deal in time for lawmakers to leave town Saturday night, statements that reflected the emerging consensus among senators who voted to pass the Defense authorization bill Thursday afternoon.

In the House, Rep. Jim Moran said it was his “hope and expectation” that lawmakers would sign off on the conference report for the omnibus package Thursday, and that the legislation would receive a floor vote Friday.

Republicans in the House signaled confidence that they could move an omnibus bill Friday with scant Democratic support, while Senate Democrats showed new flexibilities. The rhetoric from both parties suggested the new leverage Republicans have gained by passing their own version of the payroll-tax-holiday extension.

Senate Finance Committee Chairman Max Baucus (D-Mont.) said the millionaires surtax long demanded by Democrats and President Obama as an offset for the payroll-tax-cut extension is no longer a part of the negotiations.

“There’s momentum building toward a comprehensive agreement, but there are still a lot of pieces out there,” Baucus said.

He added that language expediting the Keystone XL oil sands pipeline, included in the House-passed payroll-tax bill, is still in the mix.

Republicans and Democrats alike in the upper chamber caution that big questions, such as whether the entire cost of the legislation must be offset, will depend largely on what can win approval from House conservatives. Lawmakers remain in the dark about many of the details of the closely guarded talks between Senate and House leaders.

Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) sounded a more optimistic tone Thursday morning, informing colleagues that agreement is within reach.

Reid said he has negotiated with McConnell and senior White House officials on the payroll-tax cut, extended unemployment benefits and a freeze of scheduled cuts to doctors’ Medicare payments, and is hopeful of an imminent resolution.

“We hope that we can come up with something that would get us out of here at a reasonable time in the next few days,” Reid said.

McConnell said he and Reid have “been in useful discussions about how to wrap the session up.”

He said leaders are “confident and optimistic we’ll be able to resolve” the omnibus and tax bills “on a bipartisan basis.”

Senate Republican Conference Chairman Lamar Alexander (Tenn.) noted that the leaders’ comments were “more temperate” than on Wednesday and “reflect a holiday spirit that will lead us to an ordered and dignified conclusion.”

While Reid is willing to drop the proposed tax increase on millionaires, a Democratic aide said the leader opposes cutting discretionary spending any further to pay for the package, leaving mandatory spending cuts as the primary offset for a package that could exceed $200 billion — on top of the $915 trillion omnibus spending bill.

Senate Republicans earlier in the day discussed a possible compromise that would remove language speeding up a decision on Keystone but include an ironclad commitment to bring it before the chamber at a later date.

But it remains possible that the Keystone language, which Obama has said he would “reject,” could pass the Senate.

Sen. Mary Landrieu (D-La.) said Keystone has the backing of several Democrats.

“It’s always had more Democratic support than people thought,” she said.

McConnell thinks there are as many as 14 Democrats who might support the Keystone language.

Democratic and Republican senators said they expect the cost of the payroll-tax package to be largely offset with spending cuts as well as modest revenue-raising measures.

Lawmakers noted the deficit-reduction supercommittee, which negotiated spending cuts and tax increases throughout the fall, had put together a list of bipartisan offsets that could be used to pay for the package.

“They put together good lists,” said a GOP senator. “You can just reach in and pull out ideas to pay for the package.”

Lawmakers said they expected the payroll-tax-holiday extension, the unemployment-benefit extension, the doctors’ fix and the extension of expiring business tax provisions to be entirely offset.

“I don’t think the House Republicans will accept anything that adds to the deficit,” said one Republican senator, who said GOP lawmakers in the upper chamber would follow the lead of House Republicans.

But Senate leadership aides would not say whether the entire price tag of the legislation could be offset.

It remains to be seen whether Republicans will accept project savings from the drawdown of troops in Iraq, an offset they derided as a budget gimmick during supercommittee talks.

Democrats argued that war savings are fair game, noting that House Budget Committee Chairman Paul Ryan (R-Wis.) included them in his budget blueprint released earlier this year.

— Erik Wasson contributed to this report.