Today, former Federal Reserve Chairman Alan Greenspan said in an interview that all of the 2001 Bush tax cuts, which he had previously supported, should be allowed to expire at the end of this year, citing the need for the increased tax revenue in efforts to decrease the federal deficit.
What to do about the 2001 and 2003 tax cuts that are set to expire at the end of the year has been a critical question that Congress has largely ducked so far. But a Senate hearing yesterday marked the beginning of what will likely be a contentious debate. The hearing previewed some of the messages that will be used during the upcoming debate and underscored the need for serious reform of the tax system and an eye on debt reduction.
Running for the Exits – The “Running of the Bulls” has begun in Pamplona, Spain. Combine that with the celebrations over the country’s World Cup victory yesterday and you have quite a volatile mix. Washington has its own precarious situation, though not nearly as colorful or fun. A full agenda and little time on the Congressional calendar will make for a hectic rush, especially in the Senate. Congress returns this week from its July Fourth recess with a small window before it leaves again for a month-long August recess.
Extenders Put on Hold – Legislation to extend some tax breaks and expanded unemployment insurance has been put on the back burner because senators could not agree on how to finance the package. Senate leaders decided to move on after they failed to end debate on the latest version in a 57-41 cloture vote.
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.
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.
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 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.