Unemployment Benefit Extension Returns To Front Burner

In a deal struck between President Obama and Senate Republican leaders, legislation extending federal unemployment benefits for an additional 13 months, up to a total of 99 weeks, could be on the way to passage in both houses of Congress very soon. Trading the unemployment extension desired by Democrats for extension of Bush era tax cuts to even the wealthiest Americans for 2 years, Obama went against the grain of his own party politically. In his own defense, Obama said at a press conference yesterday “A long political fight carried over into next year might have been good politics, but it would be a bad deal for the economy, and a bad deal for the American people.”

The compromise package, carrying a price tag of a $700 billion increase in the nation’s deficit, includes the tax cut extensions, unemployment benefit extensions, a 2% cut in FICA taxes withheld from paychecks of working Americans, reinstatement of a 35% estate tax on inheritances of more than $5 million from a single decedent and $10 million per couple, and extension of the college tuition tax credit due to expire December 31, 2010. Also, businesses making capital investments next year will be permitted to expense the entire amount, rather than amortizing it over the life of the asset. The tax savings in 2011 are expected to total $120 billion for wage earners, and $150 billion for businesses.

Defending the deal, which comes on the heels of dual Senate defeats for proposals to extend the Bush era tax cuts only to families earning less than $250,000 per year, and then only to those earning over $1 million per year, Obama said: “The number one priority is doing what is right for the American people.”

House Rejects Unemployment Extension

Yesterday the House of Representatives voted on a bill to extent the application deadline for the next tier of federal unemployment benefits to February 28, 2100, and the bill was defeated 258 in favor to 154 against. The legislation would have required 275 votes in favor to pass under pay as you go rules, since it included no revenue raising measure to pay the $12.5 billion cost of the benefit extension. As a result, up to 4 million out of work citizens, and their families, will lose their jobless benefits on the current filing deadline, which is November 30, 2010.

State governments pay the first 26 weeks of unemployment benefits, and after that additional federal payments can last up to an additional 73 weeks, for a total of 99 weeks of benefits: just 5 weeks short of 2 years before payments are cut off. The last extension passed by Congress was for 6 months at a cost of $34 billion. In the last 3 years the unemployed have collected $319 billion in jobless benefits, with 8.5 million citizens now collecting benefits. Of the 8.5 million, 4.8 million have already exhausted their state benefits, and are now collecting federal payments.

The federal government has never cut off benefit extensions when the unemployment rate has been above 7.4%. With today’s rate at 9.6%, Congress is likely to ultimately pass further extensions, but not before the November 30 cutoff. The debate rages on in the House about how to pay for the cost of an extension, which Democrats argue should last another year. Republicans want to use unspent stimulus money to pay for the extension, but Democrats oppose raiding any pot of money appropriated for job creation.

The House/Senate Joint Economic Committee reports that failure to continue extended unemployment benefits could take as much as $80 billion out of today’s already weakened economy, since families receiving benefits spend the money immediately because they are already living so close to the edge financially. Nevertheless, deficit hawks in the House will likely continue to oppose any bill not fully funded under pay as you go rules.

Balancing Federal Budgets On The Backs Of The Jobless

Three times in the last three weeks the U. S. Senate has filibustered legislation which would extend unemployment benefits for those who have been out of work for more than six months. Ben Nelson of Nebraska was the only Democrat to vote against cloture on the bill. A total of 1.7 million jobless folks will see their benefits run out by Independence Day. The bill would have extended the unemployment benefit period from 26 weeks to 99 weeks.

Blue Dogs Cut House Extender Package – Senate Delays Action

With authorization for longer unemployment benefits and COBRA subsidies expiring after Memorial Day, the House passed a cut back version of the extender legislation this week, but the Senate adjourned without taking any action, once leaving out of work Americans whose benefits expire in limbo until Congress reconvenes June 7. Fiscally conservative House “Blue Dog” Democrats cut $33 billion from the proposed legislation before it passed, and separated out $23 billion in Medicare doctor reimbursement extensions for consideration apart from unemployment benefits. Both House measures now extend doctor pay and unemployment compensation only through November 2010 rather than through June 2011 as originally proposed.

As passed by the House, the bills will still increase the federal budget deficit by $50 billion, and the Senate threatens to reinstate the June 2011 cutoff date when it reconvenes June 7. The House measure also includes $6 billion for federal bond issues to support local and state infrastructure construction projects.

Of course, all these Senators and Congressmen are getting their regular paychecks while they keep out of work Americans waiting two or three more weeks for their next benefit payments.

Extenders In Jeopardy

Leaders in both the House and the Senate are threatening to keep their bodies in session through the Memorial Day recess, in spite of members desire to travel home to their respective districts now for holiday parades and rallies. Nevertheless, it looks like the proposed legislation extending unemployment and COBRA benefits, along with Bush era tax breaks for individuals and small businesses, and Medicare payment levels for physicians, is doomed. Neither House nor Senate leaders have the votes to pass the proposed extenders through year end, because of the cost to the federal government. While the House could probably pass a three month extension, even that short relief appears to fall flat in the Senate, leaving those still looking for work whose benefits have already run out, or will run out soon, with little hope of further relief.

Senators and Congressmen who face tough reelection battles have added a number of revenue raising measures to the extender proposal, including an increase in oil excise taxes from eight cents to 32 cents per barrel, limits on corporate use of foreign tax credits, and a 157% increase in the tax rate venture capitalists pay on “carried interest” earnings. Business lobby protests over these tax increases could scuttle the entire benefits extension package. In addition to extension of benefits for the jobless, the bill also includes $24 billion in assistance to state governments with serious budget deficits, $6 billion to fund summer job programs for young people, and $65 billion to postpone pay cuts for doctors treating Medicare patients.

Fiscal discipline went out the window when the Obama administration wanted to stimulate the economy and pay for nearly universal health care benefits, but now that midterm elections are approaching it seems like Congress is completely willing to try balancing the federal budget on the backs of those who have still been left behind by the effects of the stimulus measures.

“Extenders” Delayed Another Week

Despite the pain and agony additional delay is inflicting on every American citizen out of work and looking for it, Congress has delayed action for an additional week on legislation extending unemployment benefits for folks whose checks ran out weeks or months ago. The “extenders” of unemployment and COBRA benefits, Bush era tax breaks for individuals and small businesses, and other essentials for the survival of the economically disadvantaged, was supposed to be put to a vote last week. Neither house of Congress is prepared to act, in spite of the fact that the last temporary extension of these provisions expires over the Memorial Day weekend.

Unemployment Benefits Extension Still Tied Up With Amendments

The cloture vote in the Senate on extending unemployment benefits for an additional 14 weeks in all states, and 20 weeks in states with more than 8.5% unemployment, set for last Friday didn’t happen. The vote is rescheduled for Tuesday afternoon, depending on whether or not Senators can agree on proposed amendments on extending and expanding the homebuyer tax credit in the stimulus package, and extending business loss tax carry back provisions an additional two or three years.

Present leadership plans are to pass whatever final package is approved in the Senate, and send it to the House without any conference committee, for action later this week. Senate Majority Leader Harry Reid and Senate Finance Chairman Max Baucus are proposing a one year extension of the homebuyer tax credit, to begin phasing down from the $8,000 in the stimulus package in April, 2010. Real estate and housing construction interests oppose this version of the measure, citing April through June as the best home sales months of the year. Senator Johnny Isakson of Georgia proposes a seven month extension of the full $8,000 credit to carry through the summer selling season.

National Association of Realtors President Charles McMillan says the summer months are needed to bring down housing inventories to a normal six month level. “We can achieve a consistent six month supply if the $8,000 tax credit is extended without phase outs through mid 2010. Consumers, particularly first time buyers, need certainty about the amount of the credit so that they can plan their transaction without any worry that a timing problem would penalize them,” he said in a letter to Majority Leader Reid.

The Reid/Baucus proposed amendments also include extending the tax loss carry back from two to four years, but using it only in 2008 or 2009 tax years, with a 20% reduction in the credit. Senator Jim Bunning of Kentucky wants a five year carry back, for both 2008 and 2009 losses, with no reduction, but that would involve a costly $16.3 billion revenue loss. The proposed offset to the cost of extending the tax loss carry back is a $17.1 billion revenue raiser involving a requirement that corporations report transactions with each other on 1099 forms to the government.

Finally, funding of the unemployment benefit extension is also controversial. Reid and Baucus want to extend the federal unemployment payroll tax to cover the $2.4 billion cost, while business groups and Republicans oppose extending the payroll tax, and seek instead to fund the extended benefits from unspent stimulus cash.

Floor Time Constraints May Delay Unemployment Benefit Extension

Senate Majority Leader Harry Reid hopes to push the 50 state 14 week extension of unemployment benefits through the Senate by unanimous consent this week, but has not said whether he can find floor time for the bill of a Republican Senator blocks the unanimous consent request. The Senate bill also gives a further 6 weeks of benefits to the jobless in states which have averaged over 8.5% unemployment for the last three months.

The House has already passed a 13 week benefit extension, and conference committee negotiations could quickly resolve the differences between the two bills, making it possible for the measure to be in the Oval Office for signature before Hallowe'en. Without unanimous consent on the Senate floor, though, Thanksgiving looks more like the holiday of choice for a bill signing.

Unemployment Extension Deal Reached In The Senate

Dumping the idea of tapping as yet unspent stimulus cash to fund extension of unemployment benefits, Senate leaders reached a deal yesterday to bring a bill to the floor next week under regular order, extending the federal unemployment tax through June 30, 2011 to pay for the bill's costs. The Senate compromise measure would give all 50 states an additional 14 weeks of benefits, and a total of 20 more weeks in any state where unemployment exceeds a three month average of 8.5%.

Conference committee action resolving differences with any House passed extension could keep us all hanging through Thanksgiving before we know what the real benefit extension will look like.

According to House Speaker Nancy Pelosi, other House initiatives to attack growing unemployment could include both time extensions and increased eligibility for the $8,000 home buyer tax credit, acceleration of depreciation deductions for businesses, a five year tax loss carryback to replace the current two year provision, and additional federal assistance with cash strapped state budgets. When Pelosi brought these ideas out of a series of morning meetings with Senate Majority Leader Harry Reid in the Oval Office, House Minority Leader John Boehner panned the concepts. "These high unemployment rates are not coming down. The stimulus is not working, and some of the policies that are continuing to be promoted here are not going to help the situation, they're going to make it worse."

Unemployment Benefit Extension Proposed

At a Senate Finance Committee hearing today Chairman Max Baucus indicated he is in favor of extending unemployment benefits for 400,000 people whose benefits will run out this month, and 1.4 million who will lose theirs by the end of this year. Rhode Island Senator Jack Reed has introduced legislation proposing to extend the benefit period for an additional 13 weeks in all states where unemployment exceeds 8.5%.

Unemployment Benefit Cash Unclaimed By 23 States

Despite the determination of Congress and the Obama administration to quickly pump billions into America's moribund economy, including extended assistance for the millions who have been rendered jobless by the recession, local politics has once again stifled the flow of federal cash into the economies of 23 states where governors and legislatures are refusing to change their unemployment compensation systems so that they qualify to receive the federal cash. A total of $3.1 billion sits in the Treasury vaults in Washington, D.C., when it should be going out to 350,000 needy jobless families who could be using the money to buy food, clothing and back to school purchases for children deprived by parental layoffs.

Dissatisfied that the benefit extension cash is not an unconditional gift to their states, Republicans in 11 states refuse to consider making the legal changes required to qualify for the federal handout. Twelve other states have partially complied with the Congressional requirements, but object to other changes needed to get the cash flowing in their direction. The problem is worst of all in Alabama, Florida, Indiana and Texas, where business taxes will automatically increase when state unemployment benefit funds run out, and local politicians refuse to do what is required to get their share of the Congressional unemployment extension appropriation.

The objections of the states - nearly half of the country - refusing the federal assistance, center around requirements to provide benefits for dependents of the unemployed, benefits for those whose work hours were cut but who were not entirely laid off, benefits for workers in job training programs, or benefits for people who quit work to care for a sick family member or because they fear domestic violence.

The negative results of this local political intransigence is not only denial of extended benefits to people out of work through no fault of their own, but also slowing down economic recovery to the tune of $3.1 billion which would be going directly for consumer purchases rather than into savings accounts, where the people still employed are squirreling away a larger portion of the tax cuts and other stimulus benefits they are receiving as a result of the American Recovery and Reinvestment Act. Seems spending nearly a trillion dollars in a hurry is a much more difficult task than Congress and the Obama administration thought it would be.