House Jobs/Tax Bill Spells Trouble

As many of you probably know by now, the House passed the latest version of the jobs/tax cut extender bill just before it broke for the Memorial Day recess.

The Senate had already packed up. So, once again, jobless workers dependent on expanded unemployment benefits will, at least temporarily, be without checks.

But that’s hardly  the worst of it. The bill that passed had suffered several surgical excisions to satisfy the requisite number of deficit-obsessed Blue Dog Democrats.

First, a month was lopped off the UI benefit and COBRA health insurance subsidy extensions. Blue Dogs still hung back. So the COBRA subsidy extension was dropped altogether, along with the extension of the enhanced federal match for state Medicaid programs (FMAP).

I don’t know whether I’m more angry, frustrated or alarmed.

I’m angry about the values the package reflects. The price tag on the bill didn’t have to be reduced by tossing out the COBRA subsidy and FMAP extensions. Lead Democrats could have pared back those tax break extensions–if what Blue Dogs wanted was a smaller bill.

Do we really care more about helping NASCAR race tracks, restaurants and rum producers or about making sure that jobless workers and their families can afford health insurance? Didn’t we just go through the agonies of health care reform to make benefits affordable for more low-income people?

I’m frustrated because anyone concerned about the short-term deficit ought to know that it results from depressed tax revenues as well as spending, including the financing of two costly wars.

The American Institute for Economic Research reports that April 2010 federal tax collections were the lowest for which it could find monthly data. Individual income tax revenues down 44% since just last year. Corporate income taxes down 64%.

It doesn’t take an advanced degree in economics to know that unemployed people typically don’t owe much, if any income tax. Also that they cut back on spending, thus depressing business revenues. They apply for benefits, including entitlements like food stamps. Up goes federal spending.

So how does the House leadership placate some of the deficit hawks? It takes out of the bill further urgently-needed fiscal aid to the states.

Virtually every state has already cut way back on spending to balance its budget. The cuts have imposed pressures on local governments, which were already struggling with their own budget shortfalls. So they’ve reduced spending too–or soon will.

In March, the Center on Budget and Policy Priorities reported that state and local governments have eliminated 192,000 public sectors jobs since last August. They’ve also undoubtedly cut spending on contracts for goods and services. More job losses there.

We’ll see still more job losses in the months to come–an estimated 275,000 in education alone. The ripple effect of these could result in the loss of an additional 82,000 jobs.

But job losses thus far have been somewhat mitigated by FMAP, which has helped states cope with their rising Medicaid rolls and freed up funds for other core programs.

Without an extension, FMAP will expire at the end of the year–halfway through most states’ fiscal years. Both the House and Senate earlier passed FMAP extensions to carry states through their entire fiscal years. So many states budgeted on the assumption they’d have the funds.

Now, as the CBPP’s President says, Congress “may pull the rug out from under them.” As many as 900,000 more jobs are at risk.

Set aside for a moment the human costs–something clearly not top-of-mind for a number of House members. Does saving $24 billion on a six-month FMAP extension make any sense from a deficit control perspective? Sure looks like penny wise, pound foolish to me.

I’m alarmed because the House bill seems a foretaste of things to come. The Senate, after all, needs 60 votes to pass even what got through the House. Over there, the top-ranking Republican on the Budget Committee has already said that we must stop extending unemployment benefits “right now.”

Consider too that emergency funding to avert the impending teacher layoffs has stalled–maybe died–because neither the House nor the Senate sponsor could round up the votes.

What more can we expect as Congress dives into the Fiscal Year 2011 budget? I shudder to think.