12/15/2011 10:59 am ET Updated Dec 15, 2011

Government Shutdown: Senate Leaders Step Back From Showdown

WASHINGTON -- Striking a remarkably friendlier tone than a day before, Senate leaders Thursday backed off angry, confrontational threats of causing a shutdown of the federal government over the stalled push to extend a middle class payroll tax cut.

On Wednesday, Democrats accused Republicans of living in a a world of "non-reality," and suggested the GOP would cause a shutdown when federal funding runs out Friday because they first want to pursue payroll tax legislation that Democrats find unacceptable before passing the "omnibus" spending bill.

Republicans countered that the payroll tax cut extension has nothing to do with funding the government, and accused Democrats of taking Washington "hostage" in order to get leverage for their own version of the payroll legislation. That 2 percent tax cut expires Jan. 1, when earners with incomes under $106,800 would see their checks cut.

The White House even stepped in late Wednesday to demand a stopgap funding bill, as Democrats wanted, to buy a little more time.

But Thursday, Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) appeared to make a reversal.

"The Republican leader and I have been in discussion," said Reid, also noting that he'd had "comfortable" talks with lawmakers on the Democratic side on funding the government. "We hope we can come up with something that will get us out of here at a reasonable time in the next few days."

His only note of warning was to suggest that the House should not make good on its threat to toss out the nearly finished joint spending bill, and push its own measure. Such a step would likely slow down the process and make it more contentious.

"The House is suggesting moving forward on an individual bill -- I think that would be a mistake," Reid said.

McConnell sounded equally optimistic about finding a resolution.

"We've been in useful discussions about how to wrap the session up," he said, adding that they were making progress on the spending bill and the payroll tax break. "We're confident and optimistic we'll be able to resolve both on a bipartisan basis."

If the sides cannot work together, it sets up a difficult and politically fraught set of problems that could leave at least parts of the government closed going into the Christmas holiday.

Such a spectacle could only damage the already horrid public perception of Congress, found to be at a new low in a Pew poll released as the two leaders made their remarks. A Democratic aide said the optimism comes because Republicans are "discussing with us an alternative to the House bill on payroll." Democrats find numerous provisions of the House bill toxic. "It's what we've been asking for," the staffer said.


Nine Poison Pills In The GOP Payroll Tax Extension Bill: