GOP threatens huge cuts to unemployment insurance

A Democratic bid for a breakthrough on payroll-tax negotiations fell flat on Thursday, as Congress closes in on a Feb. 29 deadline with few signs of progress.

If Congress fails to act: the Social Security payroll tax that comes out of every paycheck will revert back to 6.2 percent from the current 4.2 percent tax “holiday,” doctors treating Medicare patients will see their reimbursements drop 27 percent as the “doc fix” expires, and millions of long-term unemployed workers will lose benefits.

So far, public meetings of have yielded little agreement, so a 20-member House-Senate conference committee opted this week to go behind closed doors to accelerate progress toward a deal. But, so far, the toughest issue – how to offset the $160 billion cost of extending all three elements – has yet to be engaged.

On Thursday, Republicans on the panel rejected a new Democratic proposal to cut federal unemployment insurance from its current 99 weeks to 93 weeks. Republicans propose cutting back insurance to a maximum of 59 weeks.

Meanwhile, Democrats dismissed two GOP proposals aimed at making the plan more palatable for tea party conservatives wary of government spending. One was to require people receiving unemployment benefits to work toward a high school diploma by enrolling in a GED program. The other was to give states the option to require drug testing for recipients.

“Democrats are not willing to allow states the flexibility they need to give people tools to be reemployed,” says freshman Rep. Tom Reed (R) of New York. A strong advocate for these provisions, Congressman Reed says he’s now prepared to send unemployment benefits back to a 26-week level.

“The president says that the economy is good, so it must be time to go back to 26 weeks,” he added. 

Is that the view he sees of the economy back home in upstate New York? “No,” he adds. “I question the president’s numbers, but it’s time to take him at his word.”

In a public hearing on Tuesday, Sen. Jack Reed (D) of Rhode Island challenged the GED proposal on the grounds that it imposes an added burden on older workers and may not, in the end, help workers get back into the job market.

Thirty-five percent of those unemployed workers without a high school diploma are over 50 years of age, he said. Many have more skills – including technical certificates and company training awards – than younger unemployed workers with educational credentials.

“To ask them to go get a GED before they could collect on their unemployment is going to put a huge burden,” he added.

Moreover, what’s causing unemployment isn’t lack of skills but lack of demand. “That was the conclusion of the most recent report by the San Francisco Fed,” he added. “That people aren’t hiring because there’s not demand.”

Such sharp policy rifts complicate progress toward a deal. So does the congressional calendar, which has the House and Senate out for a week at the end of the month.

But the major sticking point remains how to pay for extending expiring provisions. Democrats are pushing for tax increases. Senate Democrats invited billionaire investor Warren Buffett as well as President Obama to address their annual issues conference on Wednesday. Mr. Buffet is known for proposing higher taxes on the highest income Americans. 

Last week, Sen. Sheldon Whitehouse (D) of Rhode Island introduced “Buffett Rule” legislation that requires incomes over $1 million to be taxed at at least a 30 percent rate. 

Tax hikes remain a nonstarter for Republicans. At a press briefing on Thursday, Speaker John Boehner complained that Democrats, with the support of Mr. Obama, are refusing to seriously negotiate spending cuts.

“I think it’s fair to ask: Does the president want to accomplish anything this year?” he asked. “The president will not allow their conferees to support a reasonable compromise on spending cuts.”

With the payroll-tax break headed toward another 11th-hour showdown, public opinion ratings for the Congress hit a historic low. Only 10 percent of respondents approve of the job the Congress is doing, according to the Gallup poll released Wednesday.

What’s striking about the poll is that Americans are generally more satisfied with the way things are going in the United States. Economic confidence and Obama’s job approval rate are trending upward.

“This means Congress’ image is a major exception to the gradual improvement on a number of measures Gallup is tracking,” writes Frank Newport, Gallup’s editor-in-chief.

“The next major hurdle for Congress is the Feb. 29 deadline for the extension of the payroll tax cuts and unemployment benefits. If Congress is unable to reach an agreement on these issues altogether … Americans’ confidence in their representatives could fall even lower.”