CQ TODAY ONLINE NEWS
Nov. 17, 2011 – 11:07 p.m.
Tax Cut, Jobless Aid Hang in Balance
By Joseph J. Schatz, CQ Staff
The increasing likelihood that the joint deficit reduction committee will not reach an agreement stands to seriously complicate efforts to extend a Social Security payroll tax cut and aid for long-term unemployed workers, both of which expire at year’s end.
Democrats want to use the special authority of the joint committee to renew both the tax cut and the jobless assistance, which were enacted as part of a December 2010 tax deal (PL 111-312) that also extended the Bush-era tax cuts through 2012.
But the six Democrats and six Republicans on the Joint Select Committee on Deficit Reduction remain deeply divided over the broader issue of taxes and entitlements — much less the need to extend the payroll tax break and jobless benefits and whether to offset the cost.
If the committee does not approve a deficit reduction plan by its Nov. 23 deadline, leaders in both chambers will be left with a dilemma: how to advance these two expiring programs, both of which are aimed at the middle class and enjoy a degree of bipartisan support. Any bill approved by the joint committee would come to the floors of the House and Senate under protections that guarantee up-or-down votes, bar amendments and prevent filibusters in the Senate.
In a divided Congress, with Republicans in both chambers likely to demand spending cuts to offset the cost of extending these benefits, acting outside of the joint committee’s protective umbrella would be a difficult task.
“If they don’t succeed, then we have to address these issues,” said Senate Majority Whip
Durbin said he would be open to extending the programs without offsetting their cost — a move that would actually increasing the budget deficit following months of efforts to reduce the government’s red ink. “I’m prepared to add to the deficit at this moment to bring us out of recession and put people to work,” Durbin said.
Prospects for a deal remained tenuous Thursday. As panel members publicly argued over who made what offer to whom, private talks, which lawmakers insisted were intended to bridge their differences, continued.
Six panel members of both parties gathered for more than two hours Thursday evening: Republican Sens.
Such meetings have not tended to indicate much progress in the past week, however. And one thing has been consistently clear: None of the proposals circulated by either party has gained traction.
Although the committee has by law until the middle of next week to approve legislation to curb the growth of the deficit, that package must be available to panel members for two days beforehand, and the Congressional Budget Office must have time to assess the effects of the plan. That would seem to put the real deadline sometime over the weekend or no later than Monday, Nov. 21.
If the committee does not act in time, $1.2 trillion in automatic, across-the-board spending cuts would take effect in January 2013. The committee might approve a package of budgetary savings smaller than that amount, which would reduce the size of the automatic spending cuts.
But Republicans have indicated that they will not agree to any revenue increase unless Democrats agree to serious reductions in entitlement programs. So a smaller package would, effectively, have to rely entirely on spending cuts — an option that Democrats have hinted that they will not support.
Tax Cut, Jobless Aid Hang in Balance
Unfinished Business
If the committee falls short in its months-long effort to cut a deal, a host of issues would remain unresolved when the House and Senate return after their Thanksgiving recess.
Many lawmakers want to stave off cuts in Medicare physician reimbursements that are scheduled for early next year. And in addition to the expiring payroll tax cut, other tax benefits also will expire at the end of the year. Among those are dozens of targeted tax breaks for individuals and businesses collectively known as “tax extenders” because they regularly are renewed for one or two years at a time. The pressure on lawmakers to extend these tax breaks is not particularly high, however. Unlike the payroll tax cut, they can be renewed retroactively at some point next year. And while broadly popular in the past, temporary tax breaks — such as the research and development tax credit for companies — are also under increasing scrutiny from lawmakers interested in simplifying the tax system.
From the perspective of the White House, the most important bit of unfinished business is likely to be the payroll tax cut and jobless benefits, both of which constituted large elements of a $447 billion job-creation plan that Obama proposed earlier in the fall.
Last year, Congress voted to continue for 13 months a program of expanded federal support for long-term jobless workers. Congress also voted to reduce the employee-paid share of the Social Security tax to 4.2 percent of wages from 6.2 percent for one year.
Obama wants to continue the unemployment benefits at a cost of $49 billion, and cut the 6.2 percent payroll tax levy in half for 2012, at a cost of $175 billion. He wants to cut in half the employer share of the payroll tax for 2012, for each employer’s first $5 million in wage costs. Obama’s proposal has drawn skepticism from some in both parties, but it appears to have bipartisan support amid a still-weak economy.
Although Congress chose not to offset the cost of those programs last year, the current effort comes during a second round of budget-cutting this year. Democrats on the joint committee propose using savings from the drawdown of troops in Iraq and Afghanistan to pay for extending the payroll tax cut and jobless benefits.
House Speaker
Senate Democrats, however, may try to advance legislation extending the programs by using the war savings — or with no offsetting spending cuts at all — and dare Republicans to oppose it.
“I don’t know what the Republicans would say to that,” Durbin said. “They have been deficit hawks unless you want to pay for the programs, and then they don’t like the pay-fors.”
When asked, Baucus said only that “there are a lot of ways to skin a cat.”
A Senate Republican aide expressed doubt that Democratic leaders would find the votes to extend either program if the joint committee disbands without reaching a deal.
The aide predicted that both parties would produce their own versions of legislation to extend the payroll tax cut and jobless benefits, but that unless Democrats signed on to the Republican plan — which would presumably use something other than war savings as an offset — neither would be able to garner 60 votes.
Tax Cut, Jobless Aid Hang in Balance
Durbin, for one, seemed willing to take that risk. “There are a few weeks left, and I think that many people will hate to go home for Christmas, saying to the American people, ‘Merry Christmas, your payroll taxes go up 2 percent Jan. 1, and unemployment benefits are cut off,’ ” Durbin said.
Sam Goldfarb, Paul M. Krawzak and Alan K. Ota contributed to this story.