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Keystone Pipeline 'Key' to Payroll Tax Cut Deal: Sen. McConnell

Wednesday, 14 Dec 2011 | 8:02 PM ET

Senate Minority Leader Mitch McConnell says a Democratic plan to concede on a "millionaires tax", in order to get Republicans to pass an extension of the payroll tax, likely won't be enough to get an agreement.

Senate Minority Leader Mitch McConnell (R-KY)
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Senate Minority Leader Mitch McConnell (R-KY)

“The tax they wanted to implement on business owners was something that couldn’t pass the House and couldn’t pass the Senate,” McConnell told Larry Kudlow Wednesday. “So if they are giving up on that, they are giving up on something that couldn’t have cleared either body anyway, so I don’t know how far we’re down the path toward making an agreement."

President Obama and fellow Democrats are now considering dropping the 1.9 percent surtax on income above $1 million a year they wanted to pay for the payroll tax.

But if Republicans are going to agree to extending the payroll tax cut, which expires on Dec. 31 and affects 160 million Americans, they want something in the bill that saves and creates jobs, McConnell said.

One-On-One with Sen. Mitch McConnell
Are Republicans prepared to extend unemployment benefits, if the Democrats agree to the Keystone pipeline? Discussing the ongoing payroll tax stalemate on Capitol Hill, with Sen. Mitch McConnell, (R-KY).

The Keystone oil pipeline project between the United States and Canada will create jobs, he added, and therefore it “needs to be part of the package.”

The U.S. on Wednesday faced the prospect of an imminent government shutdown for the third time this year as a fight between lawmakers in Congress over taxes and spending turned nastier.

Democrats, led by President Obama, are refusing to sign off on a bipartisan $1 trillion government funding bill that would keep federal agencies operating beyond Friday until Republicans agree to a compromise deal on the payroll tax cut. The House passed its version of the payroll tax bill on Tuesday, which Senate Majority Leader Harry Reid has vowed to kill. However, McConnell has said he wants to turn first to the government funding bill.

That funding had been agreed upon in conference reports until Obama stepped in and played politics, McConnell told Kudlow.

“Now they’ve got us two days away from a government shutdown, all instigated by the President himself,” he said. “When do you turn off the campaign? When do you take responsibility for governing?”

- Reuters contributed reporting to this article

Questions? Comments, send your emails to: lkudlow@kudlow.com

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"