A weary Senate, battered by fiscal crisis and gridlock, wrapped up the year on Saturday with votes to fund the government through FY 2012 and extend a payroll tax cut, set to expire on Dec. 31.
These votes avert a government shutdown and, following a House vote expected early next week, also delay for two months a Social Security payroll tax hike for 160 million Americans and a cutoff of federal emergency benefits for long-term unemployed workers in January.
“I’m very pleased to see the work that the Senate has done,” said President Obama, in a statement following Saturday’s vote. The payroll tax cut and extension of jobless benefits, a key part of the White House jobs plan, were initially opposed by many Republicans.
“While this agreement is for two months, it is my expectation – in fact it would be inexcusable for Congress not to further extend this middle-class tax cut for the rest of the year,” he added.
By contrast, the $915 billion “megabus” spending bill, which passed the Senate 67 to 32, was largely anticlimax. The decision to hold basic operations of government for FY 2012 to a $1.043 trillion level – $31 billion below the level for FY 2011 – was worked out at the brink of the first-ever default on the US national debt last summer.
In a nod to the costs of winding down two wars, the Pentagon, veterans’ health care, the State Department, and foreign operations see increases, although the hike for the Pentagon was lower than previous years. The Environmental Protection Agency, the National Labor Relations Board, the Election Assistance Commission, and energy subsidies, unpopular with conservatives, face significant cuts.
The House approved the FY 2012 spending package on Thursday, 296 to 121. Eighty-six House Republicans opposed the bill, on the grounds that it spent too much. The bill passed with the support of 149 Democrats and 147 Republicans.
The toughest negotiations the days before the end of this session of Congress involved extending the payroll tax and other expiring provisions – and, especially, how to pay for it.
Democrats said that the costs should be carried by a surtax on taxpayers with incomes over $1 million, in the interest of fairness. Republicans wanted to offset the costs of the payroll tax extension with further spending cuts, on the grounds that taxing “job creators” would hurt a struggling US economy.
In the end, Congress gave itself another two months to cut a deal. For now, the payroll tax rate remains at the level set in last year’s tax “holiday” – 4.2 percent for employees, down from a previous 6.2 percent level, and an ongoing 6.2 percent for employers.
The measure also blocks a 27.4 percent federally mandated cut in reimbursement rates for doctors serving Medicare patient, based on a formula passed by Congress in 1997 but not indexed for inflation. House Republicans had proposed a two-year, “doc fix” to make up the difference to physicians. Along with a 1 percent raise, the fix was expected to cost $39 billion.
Despite a White House veto threat, recently retracted, the Senate agreed to include a provision calling on the president to make a decision within 60 days on approval the Keystone XL oil pipeline from Canada to Texas refineries. The White House had postponed this decision until after 2012 elections.
The pipeline provision was added to the extenders package last week by House Speaker John Boehner in a bid to win rally conservative support. Republicans and some trade unions see the oil pipeline as a “shovel-ready” project sure to create thousands of jobs. Environmentalists and many Democrats see it as a threat that takes the nation’s energy policy in the wrong direction.
The votes left all sides disappointed. Fiscal conservatives complained that the 1,000-plus omnibus bill was rushed through with little debate and no understanding of what’s actually in the bill.
“It’s a sad commentary on Washington that legislation to fund much of our government for the entire year will spend mere hours on the Senate floor,” said Sen. Jeff Sessions (R) of Alabama, the top Republican on the Senate Budget Committee.