House and Senate Democrats still appear to be working off different song sheets as they try to address unemployment.
House Democrats want to pay for major spending on infrastructure and other job-creation measures with a new tax on the largest financial institutions, while the White House wants to preserve the tax for deficit reduction. A skeptical Senate might not even go along with a bank tax at all.
The Senate is struggling just to renew tax breaks for individuals and businesses that expired last year, let alone costly new initiatives. And as the White House presses ahead with its healthcare reform bill, they've included offsets senators had hoped to use to pay for spending and tax breaks intended to spur the economy.
"There are a lot of balls up in the air at once," said House Ways and Means Income Security Subcommittee Chairman Jim McDermott, D-Wash. McDermott and other Democrats favor extending unemployment benefits through the end of the year, arguing they are critical safety-net provisions. That could cost some $80 billion, however, on top of other items Democrats want, such as $25 billion for states' Medicaid budgets. And where there is pressure from Democrats to designate those measures as emergencies to escape pay/go rules, Republicans want to exempt a $30 billion, one-year tax "extender" package from offsets.
While Senate Majority Leader Reid and Senate Minority Leader McConnell hash out the parameters of a safety-net/tax extender package, members such as Sens. Debbie Stabenow, D-Mich., Olympia Snowe, R-Maine, and others want small-business initiatives to be part of a jobs bill, such as elimination of capital gains tax on small-business stock sales. But in the House, the focus among Democrats is on infrastructure spending.
About the only thing the chambers agree on at the moment is a modest package of payroll tax breaks, bond-financing for state and local infrastructure projects and an extension of federal highway programs. The Senate is set to approve that measure today, and Reid cited estimates it could save or create 1 million jobs. But it is seen as insufficient by many on both sides of the Capitol. "Please don't call it a jobs bill," said a frustrated House Democratic aide.
"It's a bit of start, both in terms of amount and in terms of getting some bipartisanship," said Rep. Sander Levin, D-Mich., emphasizing "bit." He added: "I think relatively soon, we'll see what the Senate does after this. This isn't the final word from the Senate, and I think there'll be more words from the House."
And even that modest bill will require another $12 billion in offsets over five years before the year is out, as CBO scored the measure as violating Congress' new pay/go principle.
That means lawmakers must come up with the money or certain mandatory spending programs would face a "sequester," or automatic cutbacks imposed by OMB, by year's end. The Senate faces a point of order vote this morning on that issue, raised by Budget ranking member Judd Gregg, a lonely voice in opposing the popular highway spending.
On top of existing highway funding authority, Levin said there are up to $80 billion worth of shovel-ready infrastructure projects House Democrats want to approve. He and others acknowledged a tax on financial institutions was being considered to help pay for such measures.
The White House favors a similar idea, but wants to preserve the revenue for deficit-reduction -- and have a clean, stand-alone vote to put Republicans on the spot. But House Democrats are eyeing the banks' money as too attractive to pass up.
"Both are good uses, but in this economy, I favor job creation over paying down debt. The more jobs you create, the more capability you have to pay down the debt," said House Democratic Caucus Chairman John Larson of Connecticut.
House Democrats are divided about what the tax should look like, however. New York Rep. Joseph Crowley, head of the New Democrat Coalition, said he was waiting to see the details before blessing the idea.
And some influential members appear hesitant about turning the levy into a broader tax on the biggest firms' revenues, as the Ways and Means panel is discussing, rather than on their liabilities, as the Obama administration has proposed. Those that prefer the administration approach say it is targeted more at Wall Street "bad actors" that made risky bets and then received heavy doses of bailout money.
Insurance companies, for example, that were barred from the Troubled Asset Relief Program could see higher taxes under the emerging Ways and Means plan, industry officials say. "I don't know why you would penalize companies that were not demonstrated to have been in errant behavior," said Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., who has looked out for insurers located around Boston and Hartford, Conn.
"There is some concern that's raised among nonbank banks, for example, that are manufacturers ... who may be caught up in a broad-brush thing that will actually hurt their ability to create jobs," added Larson, who is close to Fairfield, Conn.-based General Electric -- whose GE Capital arm is the world's largest nonbank finance company.
The Senate, meanwhile, has expressed little interest in a tax on financial firms. An apparently unconcerned Senate Finance Chairman Max Baucus said the money for job-creation measures would be found somehow. "The tax code is rich with offsets," he said.
While the larger jobs outlook remained unclear, Senate leaders were quibbling over the duration of routine extensions of expiring provisions that carry major consequences if they lapse. Republicans were pushing for a 15-day extension, while Democrats want 30 days.
If the provisions are not extended by Sunday, millions of DirecTV subscribers could see their broadcast network channels go dark -- just in time for the NCAA college basketball tournament selection show on CBS March 14. Physicians would see their Medicare payments cut by 21 percent. And the biggest drivers are unemployment benefits and COBRA health subsidies for laid-off workers, also expiring Sunday.
This article appeared in the Saturday, February 27, 2010 edition of National Journal Daily.
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