After last-minute negotiating on Thursday night, congressional leaders reached a $1 trillion spending agreement to fund the federal government through 2012. Beating the deadline by just 27 hours, the deal put the brakes on an impending government shutdown.

In the "You win some, you lose some" deal, Republicans agreed to drop a tacked-on policy measure to restrict travel to Cuba — but they were able to keep a provision stripping funds to implement new lightbulb-efficiency standards. With the federal budget settled, lawmakers are back to tackling how to extend the payroll-tax cut and unemployment insurance, both set to expire on Dec. 31. The task has been gridlocked over party disagreements on how to pay for it, and Republicans attaching their own policy demands to the bill.

In remarks on Thursday afternoon, President Obama again ordered Congress to get it done, under the threat of canceling their Christmas vacation.

"Right now Congress needs to make sure that 160 million working Americans don't see their taxes go up on January 1 … Every economist indicates that it's important for us to extend the payroll-tax cut and make sure that unemployment insurance is extended," he said at the White House. "So this Congress cannot and should not leave for vacation until they have made sure that that tax increase doesn't happen. Let me repeat that: Congress should not and cannot go on vacation before they have made sure that working families aren't seeing their taxes go up by $1,000, and those who are out there looking for work don't see their unemployment insurance expire."

Perhaps fueled by an eagerness to get out of Washington, on Friday morning lawmakers signaled that they may be closer to a compromise measure on the payroll tax and unemployment benefits. Although Democrats have dropped demands to fund the tax cut through a 1.9 percent surtax on millionaires (a nonstarter for Republicans set against any tax increases on the wealthy), they are trying to find other ways to extend it for one year, bundled with a one-year unemployment-benefits extension. Republicans are still demanding an attached provision to speed up approval of the Keystone XL oil pipeline (despite the State Department's insistence on a review of its environmental effects), but they're meeting with Democrats to find agreement on how to offset the costs.


With a deal uncertain, lawmakers are also devising a possible short-term fix that would extend the payroll tax and unemployment insurance for two months, buying more time to figure out long-term details (without having taxes go up on working Americans come Jan. 1).

"There's no reason why we shouldn't be able to extend these items — the payroll tax cut, UI — before the holidays," Obama continued in his rebuke of Congress on Thursday. "I expect all of us to do what's necessary in order to do the people's business and make sure that it's done before the end of the year."

Cynthia Gordy is The Root's Washington reporter.