We’re headed for a real showdown. The House has now rejected the bipartisan transportation bill from the Senate. Harry Reid has said that he would not accept a 90-day extension and wants to see the Senate bill pass. Something has to give.

The Senate’s transportation bill, which passed earlier this week, is more bipartisan than good. The bill lasts for two years rather than the 5 years requested by the White House, and it funds at about 2/3 the level in the President’s budget request, which itself is relatively low according to infrastructure experts. That said, it begins to actually intelligently tackle infrastructure policy, albeit with limited means, and it’s certainly preferable to the eight stopgap bills that have been the sum total of Congress’ work on this policy since 2009.

It looks as if we’re moving toward stopgap bill number 9.

The White House formally threatened a veto of the House version of a surface transportation bill, opening the question of whether any long-term bill will get signed before March when current funding on roads and bridges expires. Between the terrible House version and the Senate’s, it’s choosing between one with a bunch of disastrous elements, and another which has none of those but which is too small for the task at hand.

The Obama budget is proposing to tax dividends for high-income taxpayers as ordinary income. This is not a change on capital gains, it’s on dividends, the money earned through corporate payouts of profits to shareholders. The capital gains tax rate would rise to 20% from 15% under the Obama proposal, consistent with prior years.

Despite fierce opposition from major transit unions, the Senate yesterday gave final approval to the FAA Authorization bill, a five-year extension that removes uncertainty from the FAA, approves a next-generation air traffic monitoring system and, in Harry Reid’s telling, creates hundreds of thousands of jobs. But unions were unhappy about changes to labor law insisted upon by House Republicans, and they expressed betrayal at the hands of Senate Democrats.

The biggest reason I can find for economic optimism in 2012 is a belief that people will eventually have to buy new cars and form households, so why not this year? That appears to be the animating thought behind Matt Yglesias’ cheery forecast in the new year. But the economic story is a lot more mixed.

There’s a growing threat a hostage-taking situation over the transportation funding bill, which expires September 30. That and related non-funding Congress could shut down thousands of jobs in transportation-related construction.

Here in this age of austerity, it’s fashionable to point out that the world just doesn’t work the way it did when John Maynard Keynes was the talk of the town. You just can’t find any shovel-ready projects, so weighted are they by environmental impact reports and the other red tape of 21st century life. But this neglects an entire area where construction work is needed: maintenance. I know from living in Los Angeles that there are enough potholes to keep a small army of workers in business year-round.

Because we didn’t have enough to worry about, the Federal Aviation Administration could shut down Friday, if Republicans insist on including certain controversial provisions into a short-term extension.

Commentators are starting to figure out that the battle over Wisconsin public employee rights, couched by Gov. Scott Walker as an argument over the budget, has nothing to do with the budget. And we’ve discussed that in this space. You have the 200 legislative policy items stuffed into the bill; the cuts to Medicaid and centralizing control of the program in the hands of a Heritage Foundation writer who called for states to drop it; the measure allowing for no-bid contract sales of state-owned heating/cooling/power plants; and on and on