CHN: Congress Up Against Deadline to Extend Unemployment Insurance and Payroll Tax Cut

If this has a familiar ring it is because the same programs the House and Senate took to the brink in December are again set to expire.  In mid-December the Senate amended the House-passed Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3630), refusing to accept the egregious restrictions it placed as the price for extending the Unemployment Insurance (UI) program as well as the unacceptable offsets to pay for the bill.  When the Senate ran out of time to identify approximately $200 billion to offset the bill’s cost it instead passed a short two-month extension of UI and the two percentage point cut in the payroll tax and blocked a reduction in Medicare reimbursement payments to physicians.  The bill also extended through February 29 authorization for a number of programs not needing additional funding including Temporary Assistance for Needy Families (TANF) and Transitional Medical Assistance (TMA), a program that helps low-income families with children transition to work by allowing them to keep their Medicaid coverage for a limited period of time. (See more details in the December 16, 2011 Human Needs Report.)
Initially the House refused to accept the Senate short-term extension, insisting that the Senate acquiesce to their version.  With no deal, it appeared that with the new year, the unemployed would lose jobless benefits and those with paychecks would lose the payroll tax holiday.  But after receiving backlash from constituents and the media as soon as they went home for Christmas break, the House relented and on December 20th agreed to the Senate’s short-term extension.  The $40 billion cost  of this extension was almost entirely paid for by increasing the fees charged by Fannie Mae and Freddie Mac for guaranteeing loans for mortgages. The President signed the two-month extension into law (PL 112-78) on December 23.

Having lost the fight in December, early indications were that House Republicans would work for a quick resolution and the programs would be extended to the end of 2012.  Those hopes seem to be fading.  As in December, sticking points include how to pay for the bill and what, if any, changes to make to the UI program.  Last year a maximum of 99 weeks of UI benefits were available to unemployed workers in states with high unemployment rates.  The Extended Benefits program which provides the last 20 weeks in states with high and rising unemployment was not renewed in December so currently the maximum number of weeks of UI eligibility is 79.  The original House bill called for slashing the number of weeks to 59.  Advocates stringently opposed cutting below 79 weeks and would instead like the full 99 weeks restored.  House Republicans are pushing to include in the long-term extension provisions in their original bill to limit eligibility to UI by requiring drug testing and a high school diploma or GED or enrollment in classes as conditions for receiving benefits.  They are also pressing to allow states to request waivers that would surely result in fewer benefits for recipients.  These provisions comprise a particularly harsh affront to unemployed workers who have become unemployed through no fault of their own.  (For more information about the House UI provisions, see the National Employment Law Project report, “Sticking to Principles: Congress Should Oppose Barriers to Unemployment Insurance and Instead Provide Meaningful Reemployment Tools.”)

The cost of extending the programs in the bill to the end of 2012 is approximately $160B.  Advocates and many Democrats believe that if Republicans insist on paying for the extensions – typically unemployment insurance was considered ‘emergency’ spending and has not been paid for– new tax revenues ought to be in the mix.  While Republicans remain uncompromisingly opposed to the Democratic proposal to increase taxes on millionaires, they did propose one offset in December that would restrict eligibility for the refundable Child Tax Credit, targeting low-income children in immigrant families.   The typical taxpayer harmed by this proposal earns $21,240 per year and would experience an 8 percent increase in their taxes owed, amounting to a loss of $1,800 in the family’s income.

If Congress does not act on a full extension or another short-term extension by February 29, the programs will expire.  According to the Department of Labor nearly 1.3 million unemployed workers would lose their benefits by the end of March. It will also put in jeopardy TANF and TMA. If they do not finish their work on this bill before February 17th they will have only three days after returning from a February 20-26 recess to pass a short-term extension or year-long bill.

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