CHN: Negotiations Begin on Economic Stimulus Package

GOP Proposes $25 Billion in Unemployment Assistance
After stalling for a week over procedural differences, negotiations on an economic stimulus bill between House and Senate lawmakers got under way this week. Tax breaks for corporations and upper-income individuals versus spending on unemployment benefits and medical coverage for displaced workers are at the crux of negotiations that began December 5.

House Republicans narrowly pushed through an economic stimulus bill (HR 3090) in October that is heavily weighted towards corporate tax breaks, while largely ignoring the needs of the unemployed. During current negotiations, however, House GOP leaders have proposed extending more assistance to those who have lost their jobs. This concession to Democrats, who saw their stimulus package blocked in the Senate by their Republican counterparts in mid November, is being offered in exchange for votes in favor of legislation granting the president fast-track trade negotiating authority (HR 3005).

While only 21 Democrats voted for HR 3005 when it came to the House floor December 6 – enough to help the measure pass by a razor thin 215 to 214 margin – the GOP offer to provide $25 billion in assistance for the unemployed is scoring points with Democratic negotiators on the stimulus package, who view the proposal as an important first step. The Democratic proposal thwarted in the Senate would have provided about $26 billion in unemployment insurance and health care benefits for displaced workers.

It is unclear, however, whether the Republican proposal – put on the table by top GOP negotiator Bill Thomas (R-CA), Chairman of the House Ways and Means Committee – goes far enough to satisfy Democrats. Under the stimulus bill approved by the House in October, $3 billion would be added to the Social Services Block Grant program to allow states to offer health insurance to unemployed workers and their families. The new Republican offer would supplement the original proposal by $8 to $10 billion, and render displaced workers eligible for a tax credit to cover 50% of the costs of health insurance.

By contrast, the Democratic proposal – approved on a party-line vote by the Senate Finance Committee November 8 – would have provided $12.3 billion for a 75% federal subsidy to unemployed workers purchasing health coverage through COBRA (which allows laid-off workers to retain health coverage under their former employers’ insurance plans by paying 102% of the premiums). In addition, the Senate Finance package would have allowed states to extend Medicaid coverage to unemployed workers who do not qualify for COBRA, and provided $1.4 billion to boost the federal match to states for Medicaid.

The Democratic proposal also contained $14.3 billion to extend benefits for unemployed workers by 13 weeks (the current cap on benefits is 26 weeks). In addition, Democrats sought to expand eligibility to part-time and recently hired workers, and increase minimum weekly benefits. The House-passed bill, in comparison, simply sped up the transfer of $9 billion in federal unemployment insurance trust funds already destined for state unemployment accounts.

Under the new GOP proposal, workers who lost their jobs after March 15 – the date the National Bureau of Economic Advisers has deemed the official beginning of the recession – would be eligible for an additional 13 weeks of unemployment insurance benefits. Furthermore, workers directly affected by the September 11 terrorist attacks, including those who would not normally be eligible for unemployment insurance, would qualify for an extra 26 weeks of benefits. Chairman Thomas has said that the extended benefits would last for two years and would not be taxed during that period.

In addition to assistance for the unemployed, negotiators will also have to tackle the issue of tax cuts. The business tax cuts under the Senate Democratic plan totaled about $22 billion, far less than the $70 billion in corporate subsidies contained in the House package. Senate Majority Leader Tom Daschle (D-SD) has taken a strong position against many of the corporate and individual tax cuts contained in the House-passed bill and favored by the President. For example, Daschle opposes accelerating cuts in individual tax rates now scheduled for 2006, and is against a repeal of the corporate minimum tax.

Negotiators may also debate the merits of a month-long “payroll tax holiday,” a proposal forwarded by a bipartisan group of Senate centrists. The idea is being promoted as an alternative to providing – as both the House-passed bill and the Senate Finance Committee measure do – a $300 tax rebate to low-income Americans who did not earn enough to receive rebate checks under the tax cut bill passed earlier this year. Critics warn that low and moderate-income Americans will lose out under the centrist proposal since an employee would need to earn $58,000 to receive $300 under the payroll tax holiday plan.

Negotiations over economic stimulus legislation were supposed to continue through the weekend, with lawmakers hoping to complete a deal before adjourning for the holidays. However, at press time, talks appear to have stalled over continuing disagreements. President Bush has urged Congress to pass a bill before the new year.

Budget and Appropriations
Food and Nutrition
tax policy