The Economy -- and the Unemployed -- Held Hostage

12/08/2010 04:05 pm ET | Updated May 25, 2011

Because Congress failed to act in November to continue the federal emergency Unemployment Insurance program, two million unemployed workers are expected to go without income this month. Another million each month will go without unemployment benefits into the New Year. If Congress does not act in December, tax cuts affecting most Americans will expire and take-home pay will be lower starting in January. Why hasn't Congress acted? Because a powerful minority made up of Republicans and some Democrats blocked action until they got what was most important to them: billions in tax cuts for the nation's wealthiest individuals.

The Obama Administration negotiated with the hostage-takers. They gave in to odious demands to hand the inheritors of about 3,000 multi-million dollar estates $20 billion over the next two years. They agreed to continue high-income tax cuts with a two-year price-tag of about $95 billion. In return, they got the reinstatement of federal emergency unemployment insurance for 13 months. Tax cuts will continue for everyone receiving a paycheck, and low-income earners and college students will continue to get refund checks worth $40 billion over the next two years. They also got a one-year reduction in the payroll tax worth about $120 billion. They agreed to the hostage-takers' demands because the economy is on life-support right now and might not withstand the shock of so many billions not available to low- and middle-income people.

Millionaires, on whose behalf the hostage-takers were negotiating, will each walk away with a gag-inducing nearly $140,000 more on average in 2011 compared with what they would have received if all the tax cuts had expired.

Queasy Democrats in Congress are trying to see if the deal can be improved. Some have announced opposition to the package and if their votes are needed there could be an opportunity for important changes. Any package of improvements should include preventing the recently-passed SNAP/food stamp cuts from taking $59 a month from low-income households in 2013, when unemployment will still be high. The list should also include restoring the TANF Emergency Fund, which would create 250,000 jobs, and continuing federal funding for child support collections, which would prevent single-parent families from losing $2 billion a year. Taken together, these extremely effective measures constitute less than half the cost during one year of the gift to the richest estates-and they would put federal dollars where they will do the most good.

The President's package contains urgently needed provisions. The $56 billion to prevent federal unemployment insurance from expiring will help seven million workers and their families. But there is room for improvement. In some states, unemployment insurance runs out many weeks before the federal maximum. The deal does update the formula to prevent workers now covered in many states from losing federal unemployment benefits 13 or 20 weeks sooner than the federal maximum, but not all of the jobless will be reached. Those who think the federal emergency unemployment insurance program is doing too much could not be more out of touch with the painful economic realities facing Americans today. Continuing federal unemployment insurance and preventing the jobless from destitution must not wait beyond this month.

The Obama negotiators also protected other important help for the lowest-income families with children. Improvements made in the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) will continue. A full time working parent with two children and earning minimum wage now gets about $1,725 from the CTC. If the current level expires, that family's credit drops to about $225. Increases in the EITC for families with three or more children and for married parents also continue under the plan, as does the $2,500 American Opportunity Tax Credit, which provides tuition assistance for low-income college students. Under no circumstances should Congress leave without continuing these credits.

The hostage-takers refused to include a continuation of the President's Making Work Pay tax credit in the deal. Instead, they accepted a one-year payroll tax cut that is not as helpful to low-income workers. As a consequence, people with incomes below $20,000 will get a smaller tax cut next year than they get now. Replacing the payroll tax cut with the Obama Making Work Pay credit would give the one-fifth of the population earning less than $20,000 an average tax cut of $507. The compromise deal reduces their tax cut to $396, according to Citizens for Tax Justice. On the other hand, the top 20 percent do a lot better, particularly the richest 1 percent, who would receive about $48,000 more in 2011 under the compromise than Obama originally proposed. Such is the power of the hostage-takers.

The Obama Administration makes a big point of noting that the upper-income gifts are only for two years. As well it might--if they were to continue, their cost would skyrocket and truly jeopardize our economic security. But what will reduce the power of the hostage-takers two years from now?

This question is critical: big money interests do not lightly let go of billion dollar gains. We can only avoid being taken hostage again if the President uses every opportunity over the next two years to show the harm inflicted by the upper-income tax cuts, if Senators and Representatives do the same, and advocates help by showing the choices very clearly in human terms.

We urge advocates to join with us in a vital new Hostage Prevention Initiative. Month after month we will show people who are benefiting from services now threatened, or those who cannot get help because Congress is unwilling to find the funds. Over and over, we must bring home to the American public and to Congress that jobs, food and other necessities for millions of low-income families are more important than billions of dollars for a relative handful of multi-million dollar estates or living millionaires. That's the only way the jobless and the rest of us hostages can avoid being taken in 2012.