Harry Reid is going to try one more stab at passing the tax extenders/unemployment/aid to states bill. He filed for cloture last night and the vote will be Friday. A Democratic Senate aide tells me that "the outlook is grim" for achieving cloture, even on this drastically curtailed proposal.
The latest compromise raises the current oil spill liability fund tax to 49 cents per barrel from 8 cents. It also includes some spending cuts and pares down proposed Medicaid aid to states struggling to balance their budgets in the face of a slow economy. States are pushing Congress to extend beyond the December expiration date the extra funds for Medicaid that were included in the stimulus plan passed last year.
The extension will "help states avoid further layoffs and service cuts that could otherwise slow recovery" from the worst economic downturn since the Great Depression, the National Governors Association said in a letter on Tuesday to leaders in the Senate....
Last year's economic stimulus plan raised federal payments to states by 6.2 percent, with extra money for those with especially high unemployment.
States had asked for a six-month extension of the aid, at a cost of about $24 billion. The Senate proposal would continue the aid through June 2011 but gradually lower the amount.
Under language proposed on Wednesday, the increase would decline to 3.2 percent in the first three months of 2011 and to 1.2 percent through June. A draft floated on Tuesday had a phase-down to 5.3 percent and then 3.2 percent.
Governors and state legislatures in some 30 states have already budgeted for this funding, a huge portion of most states' budgets. A KFF report [pdf] last year found that "Medicaid is the second largest line item in state budgets following elementary and secondary education. Presently, 17 percent of state funds are allocated to Medicaid on average and it is the largest source of revenue in the form of federal grant support to each state."
It also found that decreases in funding "reduce the flow of dollars to hospitals, nursing homes, home health agencies and pharmacies, and reduce the amount of money circulating through the economy, affecting employment, income, state tax revenue and economic output." When you hear that as many as 200,000 jobs (the CBPP says it's up to 900,000) could be lost if this funding is not passed, these are the jobs in question. For the graphically inclined, this is what it looks like.
What happens without it? Lost jobs and state budgets cut to the bone. That's just on the on the Medicaid funding front. It doesn't even touch the 903,000 who have prematurely lost their unemployment benefits. That number will be 1.2 million as of Friday. It's not only incredibly cruel of our Congress to fail each and every one of those 1.2 million--and their family members--it's cutting any economic recovery we're experiencing off at the knees.
"We are in a situation where unemployment benefits could have a lot of value," said Jesse Rothstein, chief economist at the U.S. Department of Labor, who described the current 9.9% rate of unemployment as "absurdly high." Rothstein cited a study from the Congressional Budget Office that ranked unemployment insurance as the most effective form of economic stimulus and explained, "If you give money to someone who is unemployed, they are going to spend it the next day." Rothstein pointed out that the rise of long-term unemployment is due to a severe shortfall in consumer demand and an economy producing far less than its potential.
The estimate from the CBO is that unemployment benefits create $1.93 in GDP for every $1 in benefits.
Even this drastically reduced plan needs to pass, but at this point that's not looking likely. The votes that could swing on this--that have to swing on this--are Republicans. Voinovich, Brown, Snowe and Collins. Ben Nelson might be movable, but it's unlikely. You can call them, and your own Senators, toll-free at 888-254-5087.
