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Congress Faces Decisions On Extending Payroll Tax Cuts, Unemployment Benefits

Congress Payroll Tax Cut Extension Unemployment Be

ALAN FRAM   11/22/11 09:27 PM ET   AP

WASHINGTON — Congress' failed deficit-cutting supercommittee has faded away, but the pressure on lawmakers to quickly confront a stack of expensive economic issues is only growing.

Before leaving town for Christmas and New Year's, lawmakers face decisions on whether to renew payroll tax cuts that have meant an average of nearly $1,000 for more than 120 million families this year. Congress also must determine whether to extend unemployment benefits for millions of long-term jobless Americans.

Without action, both expire Jan. 1.

Also on the list: Whether to prevent a 27 percent cut in Medicare reimbursements to doctors that occurs on New Year's Day. And oh, yes – figuring out how to avoid an embarrassing mid-December government shutdown, something that has become a frequent exercise in today's bitterly divided Congress.

Protecting the payroll tax cuts, jobless benefits and doctors' payments could cost $200 billion or more. But faced with a limp economy, the huge federal debt, next year's presidential and congressional elections, and the supercommittee's finger-pointing, partisan breakdown, clashes over each are inevitable.

"Right now people are so mad and suffering so much from fiscal fatigue that it's really hard to say what they want," Steve Bell, a longtime Senate Republican budget aide who studies economic policy at the moderate Bipartisan Policy Institute, said of lawmakers.

There had been some hope of including language dealing with the payroll tax, jobless benefits and Medicare payments to doctors in whatever debt-cutting proposal the supercommittee produced.

That would have improved their chances of approval because Congress was to consider the debt panel's package under special expedited procedures. Without that protection, the fate of the payroll tax, unemployment and Medicare proposals is more clouded, with battles expected over the size of each and how – if at all – to pay for them.

"There at least would have been some sugar for everybody's taste buds" if the proposals were part of a supercommittee package, said Joseph Minarik, a former Democratic congressional aide and now research director for the nonpartisan, business-led Committee for Economic Development.

Helping the chances for eventual enactment of the three proposals is a consensus among many economists that each initiative helps the economy by pumping billions of dollars into it.

The action is likely to start in the Democratic-led Senate, where leaders are expected to force a vote on a proposal to extend the payroll tax cut. The proposed extension would be paid for by boosting levies on people earning $1 million or more per year – making it certain to fail but providing Democrats with a vote they hope to use against GOP candidates next year.

"Tell them, `Don't be a Grinch,'" Obama told a cheering crowd in Manchester, N.H., on Tuesday, saying that's the message they should send Congress. "Don't vote to raise taxes on working Americans during the holidays."

In response, House Speaker John Boehner, R-Ohio, used a written statement to note that in September, Republicans told Obama "that we stand ready to have an honest and fruitful discussion with him regarding the payroll tax extension, and that invitation stands."

In a deal with Obama last year, Congress cut the 6.2 percent payroll tax – which helps finance Social Security – to 4.2 percent for this year. That has saved 121 million families an average $934 this year, according to the nonpartisan Tax Policy Center.

Obama has proposed cutting it to 3.2 percent next year at a cost of $179 billion, plus adding another $69 billion in payroll tax breaks for employers. With Republicans and some Democrats wary of the national debt – which surpassed $15 trillion last week – the price tag well could shrink.

Meanwhile, Democrats also want to renew unemployment benefits that provide people with up to 99 weeks of coverage before the extra benefits expire Jan. 1. Without the added coverage, benefits – which average under $300 a week – would last a maximum of 26 weeks.

Without action, more than 2 million people would lose unemployment coverage by mid-February, according to the Labor Department. It would cost an estimated $45 billion to renew the extra benefits for a year.

Preventing the cut in Medicare payments to doctors is estimated to cost more than $20 billion next year. It is considered a near certainty that Congress will address it because of the clout that Medicare and doctors have with lawmakers.

Within minutes of Monday's announcement that the supercommittee had failed, the American Medical Association was warning that the 27 percent cut would "force many physicians to limit the number of Medicare and TRICARE patients they can care for in their practices."

TRICARE is the military's health program.

House leaders don't plan to bring the jobless benefits, payroll tax or Medicare reimbursement measures to the chamber's floor next week.

Congress is also far behind on nine crucial spending bills, covering everything from the Pentagon to environmental programs. Three spending bills have been completed.

Most government agencies are functioning on temporary authority that expires Dec. 16. If the remaining nine spending bills are not finished by then, lawmakers will have to vote to keep them open or face an angry public that polls show already has undisguised contempt for Congress.

To speed the work, the remaining nine measures might be wrapped into one massive package exceeding $800 billion – a price tag sure to appall tea party lawmakers, making passage complicated.

Two other items are virtually certain to wait until next year because the full impact of congressional inaction would not be felt for months or longer.

Without action, more than 20 million additional families would see their 2012 tax bills grow because they would have to pay the alternative minimum tax, a program initially designed to ensure that wealthy people don't completely escape tax obligations. A one-year fix would cost $90 billion.

Several dozen tax breaks for businesses, including a large one for corporate research and development, expire on Jan. 1. Renewal could cost more than $30 billion.

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Associated Press writer Andrew Taylor contributed to this report.

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Filed by Luke Johnson  |