JUDY WOODRUFF: It was a day of behind-the-scenes maneuvering and bargaining in Congress with two goals in mind. Party leaders moved to avert a government shutdown and possibly end the stalemate over extending a payroll tax cut.
The hopeful talk came from leaders on both sides of the aisle and both sides of the Capitol. On the Senate floor this morning, Majority Leader Harry Reid spoke of getting agreement on a $1 trillion spending bill to avert a government shutdown this weekend.
SEN. HARRY REID, D-Nev., majority leader: Those issues should be resolvable. There are a few issues that are still outstanding, but they're really small in number.
JUDY WOODRUFF: The focus was a bill that House Republicans offered last night. It would fund, but freeze most government agency budgets for the rest of the fiscal year, but it also dropped some provisions that conservatives had sought.
They included rolling back new regulations on greenhouse gas emissions and clean water rules for mountaintop mining. On another front, Senate Minority Leader Mitch McConnell reported progress on extending the payroll tax cut for 160 million Americans.
SEN. MITCH MCCONNELL, R-Ky., minority leader: And we are working hard to figure a way to resolve the remaining differences on the payroll tax extension and the related issues that are important to both sides. And we're confident and optimistic we will be able to resolve both on a bipartisan basis.
JUDY WOODRUFF: Senate Democrats signaled on Wednesday they would drop calls to pay for the extension with a surtax on millionaires, something Republicans strongly opposed.
Still to be worked out, a separate provision that would force immediate approval of the Keystone oil pipeline from Canada to Texas. Republicans wanted it. Democrats stoutly opposed it. And President Obama threatened a veto.
But House Speaker John Boehner counseled calm today.
REP. JOHN BOEHNER, R-Ohio, speaker of the House: I think everyone just needs to step back and take a deep breath. I think there's an easy way to untangle all of this. We just need to let the members do their jobs and we need to let the two institutions do their work.
JUDY WOODRUFF: For his part, at a Washington event, the president urged Congress to get all of it done, the tax cut extension, the spending bill, and another extension of long-term unemployment benefits.
PRESIDENT BARACK OBAMA: There's no reason why we shouldn't be able to extend these items, the payroll tax cut, U.I., before the holidays. There's no reason the government should shut down over this. And I expect all of us to do what's necessary in order to do the people's business and make sure that it's done before the end of the year.
JUDY WOODRUFF: But while there was still time to make a deal, a new poll suggested the damage has already been done to Congress' standing. The Pew survey found two-thirds of Americans want most lawmakers voted out of office in 2012.
For more, we are joined by Naftali Bendavid, congressional correspondent for The Wall Street Journal.
So, are we to believe what we're hearing? Are they really moving toward resolution?
NAFTALI BENDAVID, The Wall Street Journal: Well, it really does seem like the two sides looked into the abyss and took a step back.
I mean, it has been an amazing day of mood shifts on the Capitol. I mean, just yesterday, it really seemed like we might have a government shutdown, and the two sides were at each other's throats, speaking very harshly about the partisanship of each other. And, today, it was like a whole new world. Reid and McConnell came out and they made it all sound like a deal is in the works.
And, in fact, it seems that that is the case. A spending deal is probably going to be formally agreed to tonight. And then they have a -- probably a day or two more of work to do on this payroll tax increase. And then it seems like they can finally go home and bring a very contentious year finally to a close.
JUDY WOODRUFF: Now, other than the fact that Christmas is just 10 days away, why now?
NAFTALI BENDAVID: Well, I think -- really do think that both sides started to realize how bad they looked.
You know, first of all, there was the issue of yet again coming to the brink of a government shutdown. And we have had a couple more of these this year. We have had a near default of the government. And then on top of that, there was the possibility that working American would get essentially a $1,000 pay increase if they couldn't resolve this payroll tax issue.
So I think there is always a point in these negotiations where it is more to the party's interest to reach a deal than to posture and not have a deal. And we reached that tipping point, I think, some time last night and this morning.
JUDY WOODRUFF: Summarize for us, Naftali, what it is that has been the key to resolving each one of these, starting with the spending bill. Both sides giving in a little, is that right?
NAFTALI BENDAVID: Yes, the spending bill, there was widespread agreement on it, but there were these little sort of nagging issues that always come up these days on spending issues.
For example, you know, Republicans wanted to have some anti-abortion measures that had to do with the District of Columbia attached. There were some issues that had to do with whether or not President Obama's relaxation of travel to Cuba would be repealed. There are a few things along those lines.
But, really, ultimately, once they decided they wanted a deal, it wasn't that hard to work those things out. Now, the payroll tax issue is a little bit more complicated, and it is going to be interesting to see how they work that out.
The Democrats wanted to pay for it with a surtax on millionaires. That's pretty much been dropped. The Republicans wanted to pay for it in part which a 10 percent cut in the federal work force. I don't think that's going happen. But they still do need to figure out how to pay for that.
And the other thing that came up, of course, was this completely unrelated and very controversial idea of what's going to happen to the Keystone XL oil pipeline. One way or another, they are going to have to thread that needle.
But there is just a feeling on Capitol Hill that everybody wants to get a deal, everybody wants to go home, and that is something that is most likely to happen in the next 28 to 48 hours.
JUDY WOODRUFF: And on then -- just quickly, on the long-term unemployment benefits, that is looking like resolution as well?
NAFTALI BENDAVID: Yes, that is going to be in there, too.
Republicans have reservations both about extending the payroll tax cut and about extending the unemployment benefits. They are worried about spending money this way and what it's really going to get you in terms of economic improvement.
But I think they're realizing that the political reality is these things have to be done. You're not going to cut unemployment benefits in the middle of an economic downturn, nor are you going to have a tax increase on working Americans in the middle of a struggling economy.
And once that political reality was confronted, I think the rest just has to do with ironing out the details.
JUDY WOODRUFF: So does either side come out better than the other on all of this?
NAFTALI BENDAVID: You know, I don't think so.
I mean, they both come out looking pretty bad. And, in truth, you could say that about this whole year. We're coming right now to the end of a congressional year that began with the Tea Party members sweeping into power, coming into Washington in a very sort of revolutionary, fervent way. And we have seen everything from a -- almost a government default to several times almost a government shutdown.
And, ultimately, this Congress hasn't achieved what its main goal was, which was to cut the deficit by $4 trillion or so. So I don't think either side comes off looking very good. Both sides are very aware of the fact that Congress' approval ratings are something like at 9 percent.
And so I think they're going to go home, they're going to regroup, they're going to come back this year and try to do better. But, of course, next year is an election year, and it's always harder to work together in a civil way during an election year.
JUDY WOODRUFF: But, you know, they have been seeing that the public reaction to the way they have been operating has been negative for months now, and yet they have continued to have these exercises in brinksmanship. How do you explain that?
NAFTALI BENDAVID: Well, it's a really good question, because they are aware of the way they look.
But I think both sides now, they are so polarized and they're so responsive to their bases, as opposed to being responsive to sort of the great middle of the political spectrum, that they almost can't help themselves. And this controversy that we are right now is a perfect example.
Just a week ago, they seemed to be heading for fairly smooth sailing. It seemed like they were going to resolve this, they were going to reach agreement. But, of course, something had to come up to blow the whole thing up. And, suddenly, we're talking about the Keystone XL pipeline. We're talking about a millionaire surtax.
It's like they have to do these things to, I think, appease their base, to placate their most fervent activists before they can finally get beyond it and reach a deal. And, you know, I don't see any indication that that is going to change over the next year.
And, so, we're in this ironic situation where the members of Congress know how bad they look. They know what the public thinks of them, and yet they seem unable to help themselves.
JUDY WOODRUFF: So, very quickly, for those people who watch this thing by the clock, when do you predict it's all going to be figured out so they can go home this weekend?
NAFTALI BENDAVID: Well, you know, there are people who are talking about Saturday, that they will actually have a deal by Saturday, which is a lot earlier than a lot of people thought.
I would never bet that Congress is going to finish up earlier, rather than later, so I could see this extending into Sunday or Monday. But really they're pretty much right now on the verge of sewing the whole thing up.
JUDY WOODRUFF: Naftali Bendavid, The Wall Street Journal, thank you again.
NAFTALI BENDAVID: Thanks very much.