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Congress reaches sweeping deal on spending, oil export ban and specialty tax breaks

House Speaker Paul D. Ryan (D-Wis.), center, heads to a budget vote in Congress.

House Speaker Paul D. Ryan (D-Wis.), center, heads to a budget vote in Congress.

(Jim Lo Scalzo / European Pressphoto Agency)

Congressional negotiators have reached a sweeping year-end deal that will not only avert a government shutdown but also lift a 40-year ban on U.S. oil exports and make permanent a massive package of specialty tax breaks.

House Speaker Paul D. Ryan (R-Wis.) and his Senate counterpart, Majority Leader Mitch McConnell (R-Ky.), were optimistic that the final agreement would be ready for swift passage in both chambers by Thursday, but it might be pushed to Friday.

“Anybody who wants to stay here and eat up more of our Christmas holiday could do that, but at some point we’re going to have to vote, and I would think people would be incentivized to try and take care of our business this week,” said Sen. John Cornyn (R-Texas), the majority whip.

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Ryan made a strong pitch during a private session with House Republicans late Tuesday.

Top congressional leaders including Ryan and Senate Minority Leader Harry Reid (D-Nev.) were racing against a Wednesday deadline to approve a $1.1-trillion spending plan to fund the government through Sept. 30. Lawmakers are expected to pass another short-term extension to give them a few more days to finalize the deal.

Under a separate but related deal, leaders are also trying to broker a nearly $700-billion package of tax breaks — including specialty deductions for the film industry, schoolteachers and thoroughbred racehorse owners, and broader ones for business investments and depreciation.

The year-end scramble has emerged as a proxy of sorts for the national debate over climate change and broader concerns over national security.

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Republicans are pushing to lift the long-standing prohibition on exporting most U.S. oil, a legacy of the 1973 Arab oil embargo that led to long gas station lines and higher prices at the pump. Now, with prices falling and production rising, major oil companies want the ban reversed to open up new international markets.

In return, Democrats are seeking a robust package of green-energy incentives, including a five-year extension of tax breaks for solar, wind and other renewable energy development. They also want to renew the expired Land and Water Conservation Fund used to protect parklands, and to launch a new oceans conservation fund to tap oil revenue for marine protections.

“We’ve made it clear, if they want this oil export ban [lifted], there must be included in this policies that reduce our carbon emissions,” Reid said.

House Democratic leader Nancy Pelosi of San Francisco is pushing to make permanent a child tax credit and to link it to inflation so that it grows most years. But Republicans have proposed eligibility restrictions that Democrats, including President Obama, have rejected.

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Because the bills are among the last ones Congress will approve before recessing for the holidays, lawmakers are trying to load them up with priorities — creating two big packages.

The negotiations follow a bipartisan budget deal reached last fall to boost funding for domestic and defense programs. The final add-ons now being proposed by both parties reflect the broader political debate, and neither side is getting everything it wanted.

Republicans backed off their effort to attach a measure that would essentially block Syrian refugees from entering the U.S., a response to growing fears about domestic terrorism. Instead, consensus appears to be forming around a bill that would ban visa-free travel to the U.S. for most foreigners who have recently visited Iraq and Syria.

A cybersecurity bill that privacy advocates warn could result in domestic computer spying may also be included. And support has emerged for an extension of the compensation and health-monitoring funds for victims and emergency workers of the Sept. 11, 2001, terrorist attacks.

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Two soon-to-take-effect taxes imposed under Obamacare could also be postponed, one on high-priced “Cadillac” tax plans and another on medical device manufacturers.

Gone are Republican provisions to restrict access to abortion services or ban funding to Planned Parenthood. Democrats appeared to have given up on their effort to reverse a ban on using federal funds to research gun violence.

It was not clear whether a measure to help Puerto Rico out of its debt crisis would be included.

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Ryan has vowed to stick by the chamber’s three-day rule to review legislation.

That sets up House passage for the spending bill no sooner than Friday. The spending and tax packages are likely to move as separate measures in the House, because Republicans are more inclined to support the tax breaks but oppose the spending bill, while the opposite is true for Democrats. Linking them together could lead to defeat.

Deficit hawks in both parties have complained that Congress is piling on more red ink with a massive tax break package that is not paid for with budget cuts elsewhere.

Final passage could drag on in the Senate if opponents filibuster. However, several top Republicans who are running for the party’s presidential nomination, including Sen. Ted Cruz of Texas, are scheduled to be away from Washington on the campaign trail.

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lisa.mascaro@latimes.com

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