WASHINGTON -- President Barack Obama and a bitterly divided Congress have 18 days to figure out whether to continue a Social Security payroll tax cut, avoid a huge drop in Medicare payments to doctors and maintain many unemployment benefits.
But Tuesday no one knew where the two warring political parties could find common ground.
"I don't know how this will come out. I honestly don't. It's like a book that is almost written, but we don't know how the final chapter comes out," said Sen. Ben Nelson, D-Neb., a key moderate.
The House of Representatives landed the latest partisan blow on Tuesday, voting 234-193 for a Republican package that most Democrats abhor.
The Obama administration said it "strongly opposed" the bill.
"This debate should not be about scoring political points. This debate should be about cutting taxes for the middle class," an administration statement said.
Three major programs face changes Jan. 1 unless lawmakers reach agreement. They include:
SOCIAL SECURITY TAX: Employees currently pay a tax of 4.2 percent on wages up to $106,800, 2 percentage points below the 2010 level.
The tax is scheduled to revert to 6.2 percent on Jan. 1, which workers will pay next year on the first $110,100 of wages. The House GOP bill would extend the 2-point break for 2012. Obama favors that, but he opposes how the Republicans would pay for it.
MEDICARE: Under current law, Medicare payments for physician services will drop 27.4 percent in January. The House Republican bill would rescind the drop and allow reimbursement rates to go up 1 percent next year and again in 2013.
UNEMPLOYMENT INSURANCE: Regular benefits are available for up to 26 weeks, but in states with high unemployment rates, the jobless can get more aid. Currently, authority for a total of 99 weeks expires at the end of the year, and an estimated 2.1 million people could lose benefits through mid-February. Republicans would gradually reduce the maximum number of weeks to 59.
The most divisive issue involves how to pay for all this. Democrats want a surtax on millionaires. Republicans hate that; they want spending cuts, notably by extending a freeze on civilian federal pay.
Republicans also have added some new wrinkles that infuriate many Democrats. The House GOP bill would end pollution rules involving mercury and other toxic pollutants from industrial boilers, which angers environmentalists.
It also would expedite approval of the Keystone XL pipeline, a 1,700-mile project that would bring oil from oil sands in Canada to the U.S. Gulf Coast. Environmentalists are upset because oil extracted from oil sands produce more greenhouse gases than conventional oil.
The Obama administration has put off a final decision on the project until 2013 -- after next year's elections. Republicans want a decision within 60 days of their bill's enactment.
The project is "the biggest shovel-ready project in America," said Senate Republican leader Mitch McConnell of Kentucky, "and evidently the president doesn't want this project approved before the election, because a small fraction of the very liberal voters he's counting on to help him get re-elected don't like the pipeline."
The project reportedly would create thousands of construction jobs, and some labor unions are sympathetic. But Democratic leaders won't budge on Keystone.
Senate Majority Leader Harry Reid, D-Nev., said he spoke to House Speaker John Boehner, R-Ohio, about the House bill earlier this week.
"I said there's no need to send us something over here that can't get Democratic votes," Reid said.
Forging a compromise is not as simple as Republicans giving up the pipeline effort while Democrats forego the millionaires' tax. This legislation is likely to be the last major bill Congress tackles before the 2012 election year begins.
That means both sides see huge opportunities to dramatize their points.
"This bill is about jobs, jobs, jobs -- creating jobs and helping Americans find a job. It is paid for, it is bipartisan, and it will help get our economy back on track," said House Ways and Means Committee Chairman Dave Camp, R-Mich.
Nonsense, countered Rep. Louise Slaughter, D-N.Y. "This (Republican) majority is holding the middle class hostage in order to extract concessions for their friends in big oil," she said.
The next step is expected to be a Senate vote on the House plan by Thursday. Since Democrats control 53 of the 100 seats, the bill will probably fail, setting up negotiations.
Then, somehow, a resolution is expected to emerge. Obama has said he's prepared to stay in Washington through the holidays if necessary.
"Here we go to the edge of the cliff again," said Sen. John McCain, R-Ariz. "Guess what? It'll all get resolved. You just don't know exactly how this kabuki theater will come out."
By DAVID LIGHTMAN