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The Payroll Tax Cut Debate Masks Detrimental Reforms To Unemployment Insurance

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The standoff in Congress over how to extend the payroll tax cut and emergency unemployment insurance is nothing short of ridiculous.   Working class Americans are suffering in a terrible economy.   While those with work worry that their taxes are about to get hiked, and the unemployed worry that their aid is about to be cut off, congressional Democrats and Republicans are busy jockeying for a better political position.   Publicly, both Democrats and Republicans portray this debate as a fight over the length of time to extend the payroll tax cut.   However, these publicized debate parameters mask a fight of much greater significance.   While the public's focus is distracted by arguments over the time frame, Democrats and Republicans are negotiating sweeping reforms to the unemployment insurance system.

As things stand the Republican controlled House has passed a one year extension of the payroll tax cut and unemployment insurance.   The Democrat controlled Senate passed only a two month extension before ending its session for the holidays, apparently assuming that the temporary extension would pass the house without problem.   Yet the House Republicans refuse to pass the two month extension and are calling on the Senate to return to session to negotiate a compromise in a conference committee.   At the same time , Senate Democrats are calling on the House to pass their temporary extension to prevent the tax hike next year.

Both the House GOP leadership and the Senate Democratic leadership are using the standoff to score political points by blaming a New Year's Day tax hike on the inaction of the other side, but looking past this political wrangling reveals that the actual fight has little to do with extending the tax cut or unemployment insurance.   This standoff is about the Senate Democrat's rejection of the riders the House GOP leaders added to the bill to make a working class tax cut and support for the long term unemployed palatable to the rest of the Republican caucus.

The GOP leadership in the House has embarked on something of a media blitz to popularize the notion that they cannot stand for a two month extension which , as House Majority Leader Boehner characterizes it , "kicks the can down the road."   The Senate Democrats , on the other hand , say that the short time that exists before the tax cut expires at the end of 2011 is not enough time to negotiate the terms of a longer extension.  

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Most of the news media have bought into the Republican frame and are portraying the debate as a fight over whether to extend the tax cut for two months or for a whole year.   This fits in nicely with the media's standard narrative that Republicans want to cut taxes more than Democrats do.   Framed this way it seems perfectly clear that if both sides support this tax cut they should extend it for the full year.   What this frame ignores is the reason the Senate needs more time to negotiate , and the reason the House opposes a short term extension to allow that negotiation.

The current positions taken by both sides lack credibility and contradict their previous arguments.   Democrats have pushed hard for most of this congressional session to get a yearlong extension, while Republicans have spent most of this session resisting the idea that these benefits even need extending.   For the Republican leadership in the House to convince the rest of the GOP caucus to back these extensions, numerous contentious riders were attached to sweeten the deal.   Senate Democrats have not been able to pass the year-long extension they favor, because the Republican Senate minority threatens to filibuster all year-long extensions that don't contain these riders.   

When Senate Democrats say they need more time to negotiate , they mean that they need more time to try and strip these riders from a long term extension .   When House Republicans say they won't pass a two month extension, they mean they won't pass any extension without these riders attached.   This isn't a debate about how long the payroll tax cut should be extended for; it's a debate about whether or not controversial riders that create major policy changes should pass along with the extensions.

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Republicans won't pass a short term extension because this gives Democrats a chance remove their riders.   Democrats won't pass the Republican's one year extension because this would mean accepting these riders along with the extension.   Democrats want a temporary measure because they think that during the full on Republican primary season they'll have a better shot at passing an extension without the riders.

Some of these riders, such as the provision requiring the President to make a decision about the Keystone-XL pipeline within 60 days , were grudgingly added to the package passed by the Senate in the hopes that they would be enough to induce the House to go along with the temporary extension, but many other provisions have not been included in the temporary Senate bill.  

Of the riders that are still being fought over, the sweeping reforms to unemployment insurance are the most unsettling for Democrats.   Many of these reforms would effectively gut the unemployment insurance system by making it more difficult to enroll to collect benefits, by making it easier for employers to deny benefits by terminating employees rather than laying them off, and by slashing the period of eligibility from 99 weeks to 59 weeks.  

A particularly contentious change would require all recipients of unemployment insurance who don't have a high school diploma or GED to enroll to get one.   This seems sensible on the surface, except that the bill does not provide any funding to pay for this education mandate.   Since cash strapped States are already struggling to provide financial aid, this unfunded mandate would prevent the population most desperately in need of unemployment benefits from collecting them.  

Another highly controversial provision would allow States to mandate drug testing for beneficiaries.   This is a major invasion of privacy by the Federal Government (one that the Supreme Court has already ruled unconstitutional when passed by state governments).   It is also a huge giveaway to big corporations.   This reform would shift the multi-million dollar cost of pre-employment drug testing from corporate ledgers onto the public ledger.

As the end of the year deadline fast approaches both sides are digging in their heels.   There are only a few possible outcomes in this fight.   Republicans could give in and agree to pass an extension without attaching major reforms to it .   This is the least likely outcome, since extending these benefits primarily helps the Democrats constituents.   To most Republicans in Congress, the riders are more important than the extensions.   Alternatively, Democrats could accept the Republican's reforms in order to get the extensions passed.   This is a definite possibility, since extending these benefits is a major priority for the Democrats.   The most likely outcome is that neither side will give ground.   In this case, working class American's taxes will get raised , and emergency unemployment insurance will end.   At this time both sides seem resigned to this stale mate and are posturing to blame the almost inevitable tax hike on the other side.   No matter which side wins in this posturing contest, working class Americans will lose.

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