CQ TODAY ONLINE NEWS
Sept. 5, 2011 – 10:53 a.m.
Deficit Debate Turns to Talk of Jobs
By Paul M. Krawzak and Sam Goldfarb, CQ Staff
As the new deficit committee begins work this week, panel members face a major challenge: the need to strike a wide-ranging, and bipartisan, agreement to stem the nation’s flow of red ink, even after high-level negotiations throughout the summer could not produce such a deal.
And now they have a second politically divisive issue to deal with: Democratic efforts to add job creation to the committee’s focus.
The tension between those two demands is something the panel will have to resolve over the next three months.
Democrats, especially in the House, are pushing for the Joint Select Committee on Deficit Reduction to include jobs initiatives in the legislation that the panel is directed to produce by Nov. 23. Republicans are likely to oppose such proposals, particularly if the cost would add to the federal government’s $14 trillion debt.
“There’s not going to be a difference of opinion on the need to spur growth and jobs,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “But there’s going to be very strong differences of opinion on how best to do that. And that makes sense because nobody knows with much certainty about which policies actually work the best to create jobs, and certainly in this kind of economic cycle.”
The 12-member bipartisan panel, created by the debt limit increase law (PL 112-25), is charged with finding ways to trim the deficit by at least $1.2 trillion over a decade. The committee is also free to seek additional savings.
Because the debt limit law already established discretionary spending caps designed to save almost $1 trillion through 2021, the panel is expected to focus on finding additional deficit reduction through savings in entitlement programs such as Medicare and Medicaid, and through tax changes.
The committee has scheduled its first meeting for Sept. 8, when it will gather in public to hash out its rules and procedures. A first public hearing has been scheduled for Sept. 13, when Congressional Budget Office Director Douglas W. Elmendorf will discuss the history and drivers of the nation’s debt. The meetings will be open to the public.
Sluggish Economy at Issue
Both parties view economic growth and job creation as vital, but they have different philosophies on how the government should, or shouldn’t, get involved. Democrats and President Obama increasingly are pushing for new government programs or tax breaks to promote growth — including an extension of the payroll tax reduction enacted last December and a further extension of long-term jobless benefits.
Obama will address a joint session of Congress on Sept. 8 to press his case. And House Democratic Caucus Chairman
GOP leaders have criticized past administration job creation efforts such as the 2009 stimulus law (PL 111-5) and are wary of government spending aimed at spurring the recovery. Instead they stress the need to roll back regulations that they say are unnecessary and burdensome, to avoid tax increases and to reduce the deficit. Republicans say these approaches will provide greater economic certainty and encourage companies to hire and invest.
Because any legislation produced by the committee will benefit from expedited consideration in the House and Senate, both sides see such a measure as the best chance to get their proposals enacted.
Deficit Debate Turns to Talk of Jobs
A grim employment report for August released Sept. 2 added to anxiety over the struggling economy. The Labor Department said there was no net increase in payroll positions last month while the jobless rate held at 9.1 percent.
Following that report, House Democratic leader
Maryland Democrat
Those statements stood in sharp contrast to the reaction of Rep.
Hensarling blamed Obama for “standing in the way of policies that will grow the economy and bring job creators confidence.” In a statement, he urged the president to “move past proposing more short-term stimulus measures and offer policies to remove the barriers of uncertainty and to help job creators do their job by getting the government out of the way.”
Taxes in the Mix?
Apart from jobs, Democrats and Republicans on the committee will struggle to find agreement on cutting entitlement programs, on raising revenue and on whether to undertake an overhaul of the tax code.
In recent months, a stream of lawmakers has endorsed simplifying the tax system to boost economic growth and possibly to reduce deficits as well. The selection of Mark Prater as staff director of the joint committee offered hope to some that the panel will take an in-depth look at taxes. Prater is a GOP tax expert on the staff of the Senate Finance Committee.
Murray and Hensarling both credited Prater with helping to enact bipartisan measures relating to economic growth, taxes, health care and employment during two decades on the Finance panel staff.
For example, in addition to playing an instrumental role in negotiating the tax cuts enacted under President George W. Bush, Prater has worked on bipartisan deals that included revenue increases.
In his time on the committee staff, Prater worked with Chairman Bob Packwood, R-Ore. who had been a principal architect of the 1986 tax overhaul (PL 99-514), and he served as committee staff director under
Still, a restructuring of the tax code would be a heavy lift for the panel. Douglas Holtz-Eakin, a former CBO director and adviser to Sen.
Even as they ponder such a move, lawmakers are primed to consider smaller-scale tax policies, such as an extension of the 2 percent Social Security payroll tax cut for employees included in last December’s tax deal (PL 111-312).
Deficit Debate Turns to Talk of Jobs
Obama wants to continue the tax cut for another 12 months, arguing that to not do so would amount to a tax increase on lower and middle-income Americans.
In addition, Democrats and the president may propose tax incentives for employers to hire new workers, not unlike a 2010 law (PL 111-147).
Loath to let Democrats be alone in seeking lower taxes, House Republican leaders recently proposed a 20 percent tax deduction for small companies. Still in its formative stages, this proposal reflects the view of Republicans that easing the tax burden on businesses rather than consumers is the most effective way to create jobs.