WASHINGTON – The Senate halted an election-year bill to continue jobless benefits for millions of long-term unemployed workers.
Many Democrats joined Republicans on a 52-45 test vote rejecting Obama's $140 billion in new aid, protecting the jobs of thousands of state and local government workers. Democrats have been trying to enact the measure as an insurance policy against a potential double-dipping recession.
The bill's halt counters the advice of economists who support the bill's funding for additional jobless benefits and state aid to deter layoffs of public service jobs. Economist are afraid that the country could find its way back into a recession just as it's emerging from one of the largest economic downturns the U.S. has ever experienced.
Federal Reserve Chairman Ben Bernanke gave caution last week that while politicians need to devise a plan to address the U.S.'s deficit crisis, the country's recovery is still fragile. It is too soon for a immediate spending cuts on such a large scale, Bernanke added.
Although the current loss was a major hit for many, Democrats predicted that a slightly slimmer version of the measure could pass, even as early as later this week. This scaled-backed bill would extend unemployment benefits for the long-term jobless as well as provide $24 billion in state aid.
"We've got to do more to build on the existing jobs momentum and that's what these targeted measures are about," claimed White House economist Jared Bernstein.
Finance Committee Chairman Max Baucus, D-Mont., claimed the measure would "provide a path forward" as the lighter version was released late Wednesday.
However Republicans warned that the marginal difference of Wednesday's vote was a bad sign for a newly revised bill. Party leaders mentioned that even after revisions have been made, the result would still add over $50 billion to deficits over the next ten years.
President Barack Obama resurged his push for the measure last weekend, while warning that thousands of state and local public service jobs could be lost without $24 billion in Medicaid money to aid states in balancing their budgets and an additional $23 billion to ward off layoffs in local school districts.
The revised measure, which was released on Wednesday afternoon, would fall back to last year's $25-a-week hike in unemployment checks and instead of providing physicians relief of their Medicare payments through 2011, they will have only six-months.
"All I can tell you is that consensus about borrowing, debt, spending is growing stronger in our caucus and I think it is in the Democrats' as well," said Sen. John Thune, R-S.D.
An attractive, new tax on investment fund managers would impose regular income taxes on venture capitalist of only 50 percent of profits that are the result of sales of assets held for five or more years. This reduction for investors - who currently pay taxes on most of their income at the 15 percent capital gains rate rather than the 35 percent income tax rate — could only help to drive more monetary exchange.
Democratic leaders were standing firmly behind the $24 billion to aid state governments for the Medicaid health program. Roughly 30 states have already factored in the money into their budgets for the fiscal year starting July 1. Governors claim that without the money, they will be forced to lay off thousand of workers.
"If we lose this (Medicaid) money, we will have to lay off 20,000 people." Pennsylvania Democratic Gov. Ed Rendell said.
Mark Zandi, chief economist at Moody's Analytics, adds "If states don't get this aid, they will be cutting payrolls very aggressively and it is a serious threat to the recovery,"
The newly revised stimulus bill is part of a catchall measure bringing together financial help for the jobless and aid for states with the renewal of numerous tax breaks for businesses and individuals.
The announced made earlier this week said that a 21 percent cut in Medicaid reimbursements to physicians would take effect on Friday would only increase the urgency to pass the measure. And according to the latest Labor Department estimates, by the end of the week, over 900,000 unemployed individuals who have been out of work for more than six months will have been ineligible to apply for further benefits.
