Economic Recovery Measures
For weeks, Congress has been re-tooling and re-tooling the extenders bill (HR 4213), looking for 60 votes to pass. Two things have held constant: lawmakers have been unwilling to enact the bills, and lawmakers have not offset the costs. Of course, the two are related. The newest Senate bill, released on Thursday, trims the gross cost and deficit impact to $103 billion and $27 billion, respectively, from $118 billion and $55 billion.
On the eve of the G-20 in Toronto this weekend, U.S. financial markets have continued to be dominated by safe haven effects as investors (domestic and foreign) have sought what they consider the safety of Treasury instruments, particularly at the long end of the market. Safe haven effects have been driven by persistent fiscal worries about the eurozone’s ability to manage its fiscal crisis.
The statutory PAYGO law left a gaping hole for spending designated as an emergency. Since the designation has no formal definition, it can technically be used for anything; so far, it has mainly been used to exempt stimulus spending from PAYGO. But no more! Keith Hennessey has an answer on how to define emergencies:
Summertime, but the Living Isn’t Easy in Congress – Today brings the first official day of summer, but Washington has already been experiencing searing days and the Capitol dome is about to blow off from the heat inside. The longest day of the year comes as lawmakers face a long road on appropriations and taxes, not to mention the never-ending “extenders” bill, which still has no end in sight.
Legislation to extend tax breaks that expired last year, as well as expanded social safety net provisions and relief for doctors from a steep cut in Medicare payments, continues to languish in the Senate as lawmakers cannot agree on paying for the costs of the bill.
With much of the nation's attention focused on President Obama's oil spill address and much of the fiscal policy universe focused on the extenders bill, another bill was passed by the House on Tuesday. The Small Business Jobs Tax Relief Act of 2010 (H.R. 5486) provides, as you would expect, a number of small business tax breaks, although the gross cost is expected to be very small (less than $4 billion).
The Senate released yet another version of the tax extenders and social safety net bill (The American Jobs and Closing Tax Loopholes Act of 2010 - H.R. 4213), decreasing the gross cost of the bill from $137 billion to $118 billion. CBO has yet to release an updated cost estimate of the bill, but press accounts report that the bill's overall deficit impact is likely between $50 and $60 billion.
The Wall Street Journal points out that deficit aversion is coming to Washington at a bad time. Just as lawmakers are looking to provide an extra kick to the economic recovery, a growing number of them have become concerned about adding to the deficit. As the article states, President Obama has been forced into "arguing...that spending be increased and cut at the same time," and Congress has been reluctant to move on the extenders bill.
The Senate will seek an end to the extended debate over tax extenders legislation tomorrow with a cloture vote on HR 4213 even though it is not clear that the bill has the 60 votes necessary to cut off debate and move to a vote on final passage. Concerns about the cost of the package, much of which is not paid for, is the main point of contention.