* Republican leader cites broad support
* Durbin calls renewal top Democratic priority
* Graham says Keystone likely won't be in tax deal
By Thomas Ferraro
WASHINGTON, Dec 11 U.S. Senate Republican
Leader Mitch McConnell predicted on Sunday that Congress will
renew a popular payroll tax cut, but it remained unclear how
lawmakers will resolve deep differences before the Dec. 31
While he did not unveil a new deal, McConnell signaled that
he and others anticipate having one soon.
"We're going to reach an agreement," McConnell told "Fox
News Sunday," noting there is "bipartisan support" for
extending the tax cut.
The 4.2 percent payroll tax that workers pay to fund the
Social Security retirement system will return to 6.2 percent in
January if Congress fails to act. That would raise taxes on 160
million Americans an average of about $1,000 per family.
Democrats have led the charge to extend the tax break,
raising pressure on Republicans to join in or face possible
voter backlash in next November's congressional elections.
The House of Representatives is set to approve a Republican
plan as early as Tuesday to extend the tax cut, tying it to a
bid to accelerate approval of TransCanada Corp's (TRP.TO)
Keystone XL pipeline project between the United States and
Senate Democratic Leader Harry Reid has said the plan would
be rejected by his chamber because of the Keystone pipeline
provision opposed by President Barack Obama.
Senior congressional aides predict that Reid and the top
congressional Republican, House Speaker John Boehner, will soon
take the leading in brokering a deal -- just as they did in a
budget fight this year to avert a partial government shutdown.
Reid and Boehner would have to bridge major differences,
starting with how to cover the projected $110 billion cost to
extend the tax cut for one year.
Democrats favor a surtax on the rich, which Republicans
denounce as a tax hike "on job creators." Republican propose
instead extending a pay freeze on federal workers.
Assistant Senate Democratic Leader Dick Durbin, appearing
on NBC's "Meet the Press," declined to offer any predictions on
whether the tax cut would be extended.
But Durbin said, "It is the highest priority of the
president and Democrats in Congress."
"This is a make or break moment for the middle class," said
Republican Senator Lindsey Graham, appearing on the same
show, said, "The payroll tax will get extended .... and we will
find a way to pay for it in a bipartisan fashion."
Graham predicted that the proposed surtax on millionaires
will not be part of the final deal, and that the Keystone
pipeline project probably won't be included in it, either.
Backers of the project say it will create an estimated
20,000 jobs and help curb a chronically high U.S. unemployment
Obama has said he wants to delay a decision on the project
pending further studies. That would push the decision past next
year's election, and would avoid angering environmentalists
ahead of the campaign.
Democratic and Republican aides say dropping the pipeline
provision, along with the surtax on millionaires, could be part
of a final deal.
So could, they say, narrowing differences over a bid to
renew jobless benefits, which are also set to begin to expire
at the end of this month.
(Additional reporting by Andy Sullivan; editing by Jackie