For two weeks the Senate Democratic leadership has struggled to find the 60 votes needed to pass legislation that provides desperately needed assistance for unemployed workers and for states at risk of losing hundreds of thousands of jobs.  That effort remained elusive when a vote to cut off debate failed 56-40 on June 17.  Senate Majority Leader Harry Reid (D-NV) promised to keep trying to find the needed votes but optimism was waning at press time for this report.
Some senators have asserted concerns about the deficit as the reason for their repeated delays.  But although public comments are about reducing the cost of the bill, some have stalled the legislation because they want more generous tax cuts for corporations – changes that would make the bill more expensive.   These combined pressures have resulted in cuts within the American Jobs and Closing Tax Loopholes Act (H.R. 4213) that pay for business tax cuts and deficit reduction in part by reducing help for the unemployed.  The senators who are still withholding their votes want greater cuts in spending, perhaps by reducing the aid to states now in the bill or by making cuts in other federal programs.

On May 28 the House passed its version of H.R. 4213 to extend the federal Unemployment Insurance (UI) program through November and the TANF Emergency Fund through FY 2011, provide funding for jobs for youth, provide capital to build affordable housing, and renew numerous tax breaks (known as ‘tax extenders’) that were allowed to expire at the end of the year.  The House also took a separate vote to prevent a reduction in reimbursement rates for physicians in the Medicare program for 19 months.  Despite statements by economists that aid to states is still needed to prevent job loss, some House members, concerned about growing deficits, pressured leadership to drop a $24 billion provision extending for 6 months aid to states to address rising Medicaid costs.  Also dropped from the bill was a $6.8 billion provision to continue a subsidy worth 65 percent of the cost of health insurance premiums for unemployed workers.  Both this subsidy for COBRA health insurance and the federal unemployment benefits had been allowed to expire when Congress failed to act before its Memorial Day recess.  The bill raises revenues by changing the way investment fund managers classify their income and by closing other individual and corporate tax loopholes.  Slightly over half of the bill’s $113 billion cost would be paid for.  The bill narrowly passed the House 215-204.  (See CHN’s Human Needs Report article from June 2.)

The House bill was sent to the Senate where it was amended to reinstate the $24 billion in aid to states to help with Medicaid costs.  Changes were also made to the revenue-raising provisions. These changes brought the cost of the bill to $140 billion but reduced the portion that was not paid for to $79 billion  (down from $98.6 billion unpaid for in the initial bill passed by the Senate in March).  A procedural vote on June 16 failed to garner the necessary support to move the bill.  Senate Democratic leaders quickly moved to make changes to lessen the overall cost of the bill in an attempt to attract more support.  One change would lessen from 19 to 6 months the provision preventing the reduction in the reimbursement rates for physicians in the Medicare program, for a savings of $16.4 billion.  Advocates were alarmed by a second change aimed at cost-cutting affecting unemployed workers.  Under the American Recovery and Reinvestment Act passed in February 2009, unemployed workers began receiving an additional $25 in their weekly unemployment checks.  The Senate bill was changed to eliminate the additional money.  Nationally this would mean the average weekly benefit would drop from $330 to $305.  Another change to the bill would extend from July 1, 2010 to October 1, 2010 the closing date for homebuyers to be eligible for the tax credit for the purchase of a qualified home. The $118 billion cost of the revised bill would lower the deficit impact to $55 billion, $24 billion less than the earlier version.

In the meantime, the Senate rejected a Republican substitute amendment offered by Senator Thune (R-SD) that would have stripped the bill of most provisions except the tax cut extenders and unemployment insurance extension.  The amendment would have made draconian cuts beyond the cost of the bill resulting in $68 billion in deficit reduction.  The cuts included freezing federal employee salaries and making deep rescissions in money appropriated for discretionary programs in FY 2010.   A Center on Budget and Policy Priorities’ (CBPP) analysis of the amendment discusses the negative consequences of the cuts.  See CBPP report.  The amendment failed 41-57 with all Republicans and Democrat Sen. Ben Nelson (NE) voting for the amendment.

The House Passes Small Business Bill and May Try to Jumpstart Aid for Teachers
The House has continued with its strategy of considering a series of smaller ‘jobs’ bills.  On June 15 it passed the Small Business Jobs Tax Relief Act of 2010, H.R. 5486.  The bill’s provisions include temporarily excluding from the capital gains tax 100 percent of income from the sale of qualified small business stock, and increasing the deduction for trade or business start-up expenditures from $5,000 to $20,000.  The predominantly party line vote on the bill was 247-170.

Pending in the House is the supplemental spending bill for the wars in Iraq and Afghanistan, H.R. 4899, which passed the Senate in May.  The House will likely consider the bill soon after work on H.R. 4213 is completed.  Appropriations Committee Chairman Obey (D-WI) would like to add a $23 billion provision aimed at helping states to avoid laying off 300,000 teachers.  The question will be whether fears of the long-term deficit will trump the need to maintain jobs and prevent the economy from sinking backwards with higher unemployment.

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