Story highlights House Republicans link the Keystone XL pipeline to extending the payroll tax cut

Sen. Reid: "They are just wasting valuable time because it will not pass the Senate"

Rep. Boehner: The pipeline "would create tens of thousands of jobs immediately."

Senate Democrats have begun working on a new bill of their own

Ensuring a pre-holiday collision course with the Senate, House Republicans Friday ignored criticism from President Barack Obama and congressional Democrats and formally unveiled a bill that extends the payroll tax cut and benefits for jobless Americans, but ties those items to a provision that clears a path toward approving the Keystone XL pipeline.

Senate Democrats bristled at the inclusion of the controversial pipeline -- which would eventually run from Canada though the Midwest to the Gulf of Mexico -- and Senate Majority Leader Harry Reid promised it would not pass in the Senate.

"Now is not the time to be debating unrelated measures like an oil pipeline," Reid said in a statement Friday. "If the House sends us their bill with Keystone in it, they are just wasting valuable time because it will not pass the Senate."

The House GOP measure extends the payroll tax cut for one year and renews aid for the unemployed, while cutting back the maximum length of jobless benefits from the current 99 weeks to 59. The bill also allows states more flexibility in distributing unemployment assistance, permitting states to require those applying to submit to drug tests or show they are pursuing a high school degree if they don't have one. The bill would also avoid a scheduled cut in pay for Medicare physicians for two years, the so-called "doc fix."

But as a way to bring on reluctant conservative Republicans, who voiced concerns about the impact of the payroll tax cut on Social Security, GOP leaders insist on keeping the provision aimed at moving toward approving the pipeline project within 60 days, something House Speaker John Boehner argued Thursday "would create tens of thousands of jobs immediately."

To pay for the bill, GOP leaders use a series of spending cuts, including freezing pay for federal employees and members of Congress, eliminating a child tax credit for those in the U.S. illegally, and increasing Medicare premiums for those who earn more than $80,000 annually.

"This package does not include everything Republicans would like, nor does it have all that Democrats have called for; but it is a win for the American people and worthy of the president's signature," Boehner said in a written statement.

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The pipeline issue is just one part of the problem for Senate Democrats who disagree with "central elements" of the GOP bill, including the length of the unemployment insurance extension and the proposed cost offsets, according to one Democratic aide.

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Earlier this week, Obama warned that he would reject any bill that coupled approval of the Keystone XL project to a bill renewing tax cuts. And White House Press Secretary Jay Carney reiterated the president's opposition to the package on Friday, saying "Republican leaders in Congress are still playing politics at the expense of middle class families."

Carney said the GOP plan violates previous budget agreements and "gives a free pass to the wealthiest and corporations" while "choosing to refight old political battles."

House Democratic Leader Nancy Pelosi argued Friday the GOP bill "doesn't have a shot" and said the pipeline provision is "a poison pill designed to sink the payroll tax cut."

The House is expected to vote on the bill Tuesday. In the meantime, Senate Democrats have begun working on a new bill of their own, which the same Democratic aide hoped would be a "credible solution" to the standoff.

Democratic leaders and staff will work over the weekend writing the new offer and could put it up for a vote by the middle of next week.

The aide said the bill will be "designed to attract bipartisan support," although the aide could not say if Democrats would jettison the surtax on incomes over $1 million as part of this new bill. Senate Republicans to this point have stood nearly uniformly against the surtax as a way to help pay for the payroll tax extension.