Brian Beutler December 16, 2011, 7:17 PM

Senate leaders have agreed to a plan that will prevent key policies, including a two percent payroll tax cut for employees, from lapsing on January 1, 2012, according to top aides. But the agreement will only extends the measures for two months, setting Democrats and Republicans up to relitigate this same fight fight early next year. And it comes at a political cost to Democrats who were forced to relent on a provision forcing President Obama to take a public position on the Keystone XL oil pipeline.

The $30 billion package will be paid for by increasing the fees lenders pay to mortgage giants Fannie Mae and Freddie Mac. It includes two month extensions of the existing two percent payroll tax; emergency unemployment benefits; and the “doc fix” which prevents Medicare physicians from experiencing a deep automatic pay cut.

In a political hit for Democrats, Republicans insisted on and secured a provision that requires the Obama administration to either greenlight the Keystone XL oil pipeline or for President Obama to publicly nix it by declaring it not in the national interest. Sources indicate that Obama could deal with this requirement without forgoing a chance to revisit the issue after the election, as the administration originally planned.

Vote timing remains unclear, though lawmakers hope to pass this extenders package, and a separate measure to fund the government though the end of the fiscal year, in quick succession on Saturday morning or early afternoon. That will depend in part on House Republicans, who earlier Friday expressed deep reservations about replaying this fight so soon, at a time when Republicans are choosing their presidential nominee and Obama is out on the trail. It’s an unlikely outcome, but if they reject the agreement — and implicitly rebuke Senate Minority Leader Mitch McConnell — it would sink the deal, and send negotiators back to the drawing board.

Doc fix, Fannie Mae, Freddie Mac, Keystone XL, Payroll Tax Cut, Unemployment