Payroll Tax Cut Proposal In House Defies Obama Veto Threat, Adds 'Poison' Pipeline Provision (UPDATE)

WASHINGTON -- House Speaker John Boehner heard President Obama's threat to veto a payroll tax cut if Republicans add a controversial pipeline project, and ignored it Thursday.

The Ohio Republican rolled out the bare bones of a GOP plan to extend the tax cut that not only would expedite approvals for the construction of the Keystone XL pipeline from Canada to Texas, but would also waive clean air rules for boilers and many incinerators.

"The president says that the American people can't wait on jobs. Well, guess what? We agree wholeheartedly with the president, and the Keystone pipeline project will create tens of thousands of jobs immediately," Boehner told reporters on Capitol Hill.

"If the president is serious about his commitment to economic growth and jobs in this country, he'll sign this bill," said House Majority Leader Eric Cantor (R-Va.).

"Mr. President, we will have some of your ideas in this bill," said Rep. Jeb Hensarling (R-Texas), "But maybe it's time to try some of ours. Do not veto this jobs bill."

But after a meeting with Canadian Prime Minister Stephen Harper just a day before, Obama said he would not accept attaching the pipeline project, which his administration recently delayed over environmental concerns.

He stood by his threat Thursday.

"When I hear the speaker or the Senate Republican leader wanting to dicker, or wanting to see what can they extract from us in order to get this done, my response to them is just do the right thing, focus on the American people," Obama said in the White House briefing room.

"The suggestion is somehow, this Keystone issue will create jobs," Obama added. "However many jobs might be generated by a Keystone pipeline, they are going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance.

"Get it done," the President challenged. "If not, maybe we'll have a white Christmas here in Washington," he said, reaffirming that he won't go on his Hawaiian vacation until the deal is done.

As much as environmentalists don't like the Keystone XL project, they will likely be even more concerned over the other environmental provision Boehner mentioned: a bill that would exempt boilers and small incinerators from regulation, allowing them to burn any hazardous waste without oversight.

The Environmental Protection Agency estimates that waiving those regulations would cause the premature deaths of some 8,100 people a year.

Democrats were not convinced Boehner's proposal would pass in the House. "We'll see. That whip operation has face-planted too many times for me to buy it yet," said one Democratic aide.

"The reason that they're Christmas-treeing this is they don't have the votes on the payroll tax," said Sen. Chuck Schumer (D-N.Y.), referring to the addition of unrelated provisions to the payroll tax cut plan.

"If they're playing games with this, or they're putting in poison pills because they can't pass it otherwise, it shows the kind of regard they have for middle-class concerns," Schumer said.

Democrats have proposed extending the current payroll tax holiday through 2012 and expanding it from 2 percent to 3.1 percent. They would pay for it primarily by putting a 1.9 percent surtax on income above $1 million.

Boehner said his version would be paid for as well, but did not elaborate as to how.

The tax cut expires Jan. 1.

UPDATE: 3:31 p.m. -- The Senate blocked the Democrats' latest proposal Thursday afternoon, killing it 50 to 48 in a procedural vote that had a 60-vote threshold. Republican Sen. Susan Collins, of Maine, voted with Democrats, while Sen. Joe Manchin (D-W.Va.) crossed over the GOP side. Independent Vermont Sen. Bernie Sanders also opposed the bill.

The Senate then voted again on a Republican plan to extend the tax cut and pay for it by cutting the federal workforce. The proposal got just 20 votes last week, and managed only 22 Thursday.

Democratic leaders said they intend to stay in session until the payroll tax is extended. Action on the House version is not expected until next week, leaving little time to get the measure passed, not to mention to finish efforts to extend unemployment insurance, fund the government, and prevent the alternative minimum tax from skyrocketing.