February 15, 2012
A Rare Deal
There’s nothing like a deadline — and the prospect of acute political embarrassment — to concentrate the mind. With Congress about to go on recess, and with Republicans fearing a voter backlash, negotiators on Wednesday were putting the finishing touches on a deal to extend the payroll tax cut and federal jobless benefits through 2012.
The agreement is imperfect but sound. It will help struggling Americans and the struggling economy. It is also a political win for Democrats and President Obama, who had made extending the payroll tax cut and the jobless benefits a centerpiece of his jobs agenda. We hope that it gives them the courage to stick to that agenda if they face another round of Republican obstructionism.
As recently as late last year, Republicans were refusing to renew either of the provisions — because they did not want to raise taxes on millionaires to pay for them, as Democrats had proposed, and because they wanted to deny the president anything he asked for. In late December, they grudgingly agreed to a two-month extension. On Monday, recognizing the political cost of standing in the way of a middle-class tax cut, they dropped their demand that it be offset with additional, deep spending cuts.
The payroll tax cut will add $100 billion to the deficit, a consequence, in large part, of Republicans’ refusal to raise taxes on the rich to pay it. The Republicans got an offset for the jobless benefits, whose $29 billion cost will be covered by requiring newly hired federal workers to contribute more to their pensions and by selling parts of the wireless spectrum. Paying for these emergency benefits was unnecessary, but the compromise seems reasonable.
The tax cut and jobless benefits will both boost families’ spending money, a crucial support to the weak economy. The payroll tax cut reaches 160 million Americans, while federal jobless benefits reach some four million Americans who have been out of work for more than six months. Moody’s Analytics estimates that letting the two provisions lapse would cause a large hit to demand that would result in the loss of more than 500,000 jobs in 2012.
The duration of federal jobless benefits — which generally kick in after 26 weeks of state-provided benefits run out — was reduced to a maximum of 73 weeks in high-unemployment states and 63 weeks in average states, compared with as much as 99 weeks currently. That’s better than the 59 weeks that Republicans had called for, but it is still stingy at a time when there are 5.5 million people who have been unemployed for more than 27 weeks.
Democrats successfully blocked Republican demands to impose uncalled-for conditions on applicants for jobless benefits, including drug testing and requiring them to be high school graduates or working toward an equivalency degree. (A fig leaf requires applicants to be drug-tested if they lost their job because of a failed drug test or if they are seeking a job that generally requires a drug test.)
To avert a 27 percent cut in Medicare payments to doctors, the deal makes a more problematic $21 billion cut from health care spending, including a $5 billion cut to a disease-prevention fund, which President Obama had also proposed cutting. These cuts, like the pain being imposed on federal workers, could have been avoided if the rich had been asked to pay slightly higher taxes.
A vote in both chambers is scheduled before the upcoming recess, and already some of the most conservative Republicans are grumbling about it. But, for now, this is a refreshing change. Republican leaders deserve credit for agreeing to the deal, as do Democratic leaders for insisting on doing the right thing for the economy.