The New York Times
June 14, 2010
Since June 1, when federal unemployment benefits began to expire, an estimated 325,000 jobless workers have been cut off. That number will swell to 1.25 million by the end of the month unless Congress extends the benefits. The Senate, so far, has failed to act.
Some senators, including Democrats, have balked at an unrelated provision that would begin to close a tax loophole enjoyed by some of the richest Americans. You heard right. Desperately needed unemployment benefits have been held hostage to a tax break for the rich, and the Senate's Democratic leadership has had to delay and finagle to get its own caucus in line.
State-provided unemployment benefits generally last for 26 weeks, and the federal government picks up the tab after that, provided Congress approves the extensions. There is no disagreement over the need: 46 percent of the nation's 15 million jobless workers have been unemployed for more than six months -- a higher level than at any time since the government began keeping track in 1948.
There is not even any genuine debate about how to pay for extended benefits. An extension through November would cost about $40 billion. But unemployment benefits are correctly considered emergency spending -- they are a vital safety net, and the money is crucial to supporting consumer demand in a weak economy -- and exempt from pay-as-you-go budget rules.
Nonemergency provisions in the bill do need to be paid for, including renewal of several generally useful business tax breaks, like the research-and-development tax credit, totaling $32 billion over 10 years. To help cover those costs, Democratic lawmakers in the House and Senate started out with the sound idea to close an egregious tax loophole that allows wealthy fund managers at private equity firms and other investment partnerships to pay a top tax rate of just 15 percent on much of their earnings -- versus a top rate of 35 percent for all other higher-income Americans.
Closing the loophole would raise an estimated $25 billion over 10 years. Many private equity mavens, venture capitalists and other partnerships have lobbied to keep as much of the loophole as they can. Most Republicans and some Democratic senators -- including John Kerry of Massachusetts, Mark Warner of Virginia and Maria Cantwell of Washington -- are doing their bidding.
In its version of the bill, the House closed part of the loophole: fund managers would retain the special low rate on 25 percent of their privileged earnings. The loophole measure was watered down even more in the Senate. And investment partnerships are still lobbying.
Senators aren't likely to vote on the bill until the end of this week. Then it would need to be reconciled with the House-passed version. In the meantime, hundreds of thousands more jobless Americans will lose benefits.
The Senate bill is also urgently needed because it includes a provision to provide $24 billion in emergency fiscal aid to states, which is vital to preventing further mass layoffs and damaging budget cuts on the state and local levels.
The right thing to do is obvious. The House and Senate should immediately extend unemployment benefits and aid to states and close the fund-managers' tax loophole -- completely.
That so many senators have balked is a bad sign for the economy and for the most vulnerable Americans. The fact that lawmakers are not willing to ask the nation's wealthiest to pay their fair share of taxes also makes a mockery of all their talk about deficit reduction.