The Shrinking Unemployment BillJune 17, 2010 - by Donny Shaw
Once again, Democrats are downsizing H.R. 4213, the unemployment insurance/tax extenders bill, in order to lessen its impact on the deficit and round up the support to pass it. The bill has been floundering in the Senate for weeks, and yesterday, it officially stalled out after the Democrats failed 45-52 to overcome an important procedural hurdle requiring 60 votes to pass.
According to Sen. Max Baucus [D, MT] and the Senate Finance Committee, these are the big changes in the revised bill:
- Shorten the Medicare payment cut patch, or “doc fix,” from 19 months to 6 months — Doctors are currently facing a 22% cut in their Medicare payments under an automatic pay formula that Congress created in 1997. The formula has recommended pay cuts for the past 7 years, but each year Congress has overridden it by passing temporary temporary patches. By shortening the length of the current patch by 13 months, the bill, technically, costs $16.4 billion less. But these savings are pretty cheap because Congress will almost certainly be back in 6 months when this patch expires to extend it again.
- Eliminating the Federal Additional Compensation program — This is a stimulus program that provides an extra $25 per week for people receiving extended unemployment benefits. Eliminating it saves $5.8 billion over the next ten years.
- Changes in the carried interest tax loophole closer — One of the big revenue raisers in the bill is a provisions to partially close a loophole in the tax code that lets hedge-fund and private-equity managers pay the lower capital gains rate (15%) on the cut they take from the appreciation of their clients’ portfolios rather than the regular income tax rate (up to 39%). In the Democrats’ last revision of H.R. 4213, they softened this provision to satisfy the influential hedge fund industry. In this revision, they are tightening it back up a bit by increasing how much of their income hedge fund managers old have to pay at the regular rate. This change would bring in an extra $13.9 billion over the next ten years.
There are also several smaller changes in the revision that you can see by downloading this PDF from the Finance Committee. In total, the revision takes a little more than $20 billion off the total deficit impact of the bill. According to the Congressional Budget Office, the revised bill would cost $105 billion and its net deficit impact would be $55 billion.
The big question: are these changes significant enough to win over the 12 Democrats who voted against the bill yesterday plus at least one Republican? That’s what it’s going to take for the Democrats to break a Republican filibuster and get this through the Senate.