This week is shaping up as a fitting finale to a year in which the federal government narrowly escaped a shutdown and default on the U.S. debt and Congress invented a star-crossed “Super Committee” to slash the deficit.
With less than a week before Congress is scheduled to adjourn for the year, a deal was reached in the House to extend the payroll tax cut and employment benefits. But don’t count on it passing the Senate. The same bitter partisanship and crippling legislative one-upmanship that marked much of 2011 is threatening to produce another political train wreck, which would leave 160 million Americans with an average of $1,000 in higher Social Security payroll taxes and eliminate unemployment benefits for millions of desperate families.
The bill, which links payroll tax relief and unemployment insurance to GOP priorities, includes approval of the $7 billion Keystone XL sand oil pipeline that President Obama last month put on hold until after the election. According to Senate Democrats, it’s “dead on arrival.” As expected, political leaders on both sides of the aisle are once again talking past each other and forging widely divergent bills in the GOP-controlled House and Democratic controlled Senate.
Republicans hail the proposed trans-U.S. pipeline project as a sure fire jobs generator, and are blasting Obama for caving in to pressure from environmentalists who protested that the pipeline would endanger precious ground water resources. Senate Majority Leader Harry Reid, D-Nev., dismisses the demand as “ideological candy” for the GOP political base, while the White House issued a statement charging that the House bill “plays politics at the expense of middle-class families.”
With Obama’s economic stimulus package in serious doubt, and a massive $1 trillion appropriations bill essential to keeping the government operating for the remainder of the fiscal year temporarily on hold, the dysfunctional Congress is once again inching towards the edge of a cliff. The massive bipartisan spending bill appeared to be sailing towards approval until the Democrats abruptly put a hold on it this week to gain some negotiating leverage with the Republicans.
It’s another grim picture, eerily reminiscent of last April’s near government shutdown and last summer’s debt ceiling fiasco, when Congress and the White House came dangerously close to triggering a Treasury default on U.S. debt.
The “Super Committee” that was created in an effort to cut the deficit by $1.2 trillion was a flop, when its 12 members could not reach a compromise on spending cuts and tax revenue increases just before Thanksgiving. That high profile failure is set to trigger $1.2 trillion of automatic cuts in domestic and defense programs beginning in 2013.
While both sides can point to success in locking in a total of $2.2 trillion of deficit reduction over the coming decade, the budget process was messy and contentious, and it further undermined the public’s confidence in Congress and the president.
Sen. Jeff Sessions of Alabama, the ranking Republican on the Senate Budget Committee, lamented Tuesday that the congressional budget and spending process has become so mired in partisan gamesmanship that crisis management has become the new normal for the federal government. “It’s going to be a very, very ugly process,” Sessions told the Fiscal Times on Tuesday. “It’s not going to be consistent with the role of Congress. You’ve got a few leaders meeting secretly, proposing solutions to our difficulties that will somehow finally pass because the alternative is worse. So I just don’t feel good about it, frankly.”
“The Congress isn’t dysfunctional. Harry Reid is dysfunctional,” thundered Sen. Tom Coburn, R-Okla., a leading deficit hawk voicing widespread GOP frustration with the Senate majority leader’s tough negotiating tactics. “The [Democratic] leadership is dysfunctional. He hasn’t allowed the Senate to operate, and because of that the country has a very sour taste of what is going on.”
House Minority Whip Steny Hoyer, D-Md., disputed the Republicans claims, saying that Boehner and other GOP leaders are essentially “sticking [their] finger in the eye of those who disagree with the non-germane policies that are included simply for the purposes of energizing a small political base in their party.”
Sen. Barbara Boxer, the combative California Democrat, put the blame squarely at the feet of Boehner and his conservative Republican House caucus. “I’ll tell you,” she told reporters. “Those guys over there have one agenda, and it’s for the top one percent and it’s also standing up for polluters. If they try to stick it to the middle class, they’re not going to get anywhere over here.”
While lawmakers on both sides of the aisle say there is little chance that the government could face another Christmas season shutdown – as it did in late 1995 and early 1996 when Republicans led by then House Speaker Newt Gingrich clashed with President Clinton over the budget and Medicare – there is a chance that the most economically vulnerable Americans will get the short end of the stick in this political struggle.
“It’s a fitting finale because it’s the same kind of fitting finale that comes at every break when something needs to be done,” Sen. Ben Nelson, D-Nebraska, told The Fiscal Times.
Here is what’s at stake:
- A two-percentage point reduction in the Social Security payroll tax, from 6.2 percent to 4.2 percent, that is set to expire at the end of the year. While most lawmakers think it is important to extend the tax break to help the economy, there is broad disagreement on how best to offset its estimated $180 billion cost over the next five years.
- Unemployment insurance benefits are scheduled to expire and up to 5 million jobless Americans will find themselves without a safety net unless there is a deal to extend it. The GOP bill would reduce the current maximum unemployment benefits from 99 weeks down to 59 weeks, while the Senate favors extending the full 99 weeks of benefits, which would be an estimated cost of $44 billion.
- Nearly 60 other tax provisions and loopholes – including an above-the-line deduction for college tuition and fees worth a possible $4,000; the educator’s $250 deduction for out of pocket expenditures for classrooms; and the option for older owners of traditional IRA’s to roll over distributions to a charity– are set to expire unless Congress and the White House agree to extend them.
- The Medicare Doc Fix. The legislation would also prevent an automatic 27 percent cut in Medicare reimbursements for doctors in January, a reduction that could force some to stop treating Medicare patients. Instead, their reimbursements would rise by 1 percent each of the next two years.
While the details of the $1 trillion spending measure to keep the government operating through next Sept. 30 have yet to be released, news reports indicate there will be clear winners and losers in the legislation that essentially keeps spending at last year’s levels.
The Pentagon will receive a one percent boost in spending unrelated to the wars in Afghanistan and Iraq, but the Environmental Protection Agency’s budget would be cut by 3.5 percent and foreign aid would be trimmed. The spending legislation that must be enacted by Friday – when the current continuing resolution runs out -- essentially freezes agency budgets on average at last year’s levels. It covers money for combating AIDS and famine in Africa, patrolling the U.S.-Mexico border, operating national parks and boosting veterans' health care.
