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Congressional Democrats downshift on spending, cut provisions to jobs bill

By Lori Montgomery and Shailagh Murray
Washington Post Staff Writer
Saturday, May 29, 2010; A01

Congressional Democrats, worried about public perception that government spending is out of control, tapped the brakes on Friday. After agonizing all week, the House narrowly approved a jobs bill, but only after stripping it of provisions that would have extended health insurance subsidies for the unemployed.

Normally, Democrats would have little trouble drumming up votes to help jobless workers. But as the economy shifts from recession to recovery, many lawmakers say their constituents are more interested in curbing the soaring national debt than in spending to aid the afflicted. Democratic moderates and freshmen who face tough races in November are applying new scrutiny even to broadly popular programs.

"What might have been acceptable a month ago has moved," said Rep. Gerald E. Connolly (D-Va.), who voted against the jobs bill while praising House leaders for scaling it back. As the election approaches, he said, "there is going to be a fiscal standard that is, frankly, much more rigorous."

Approving a new spending bill isn't typically a sign of frugality, and Republicans mocked the idea of a new rigorous standard, noting that the bill would cost an estimated $116 billion. But Democrats had sliced tens of billions of dollars from their original proposal, cutting the deficit impact by two-thirds.

Even the trimmer package faces an uphill climb in the Senate, whose members left town late Thursday for the 10-day Memorial Day holiday break. The stalemate leaves in limbo an estimated 5.3 million jobless workers who rely on federal emergency unemployment benefits. Those benefits cannot be renewed after next week unless Congress acts.

At 9.9 percent, the jobless rate is higher than when Congress first triggered emergency benefits in 2008 and expanded last year as part of the $862 billion stimulus package. Andrew Stettner, deputy director of the National Employment Law Project, said it would be a mistake to abandon jobless workers on the altar of the "the deficit craze."

"This is the worst labor market we've had since the Second World War," he said. "We can't just say we're done with it."

The ambivalence over the jobs package underscores the broader deficit anxiety that is finally stanching the flow of cash Washington has pumped into the economy over the past two years. President Obama on Friday threatened to veto a House-approved defense authorization bill because it would finance a fighter jet engine the Pentagon considers unnecessary.

"Our military does not want or need these programs being pushed by the Congress," Obama said. "And should Congress ignore this fact, I will veto any such legislation."

The travails of the jobs bill illustrate just how the climate has changed. Two weeks ago, two powerful committee chairmen, Sen. Max Baucus (D-Mont.) of Senate Finance and Rep. Sander M. Levin (D-Mich.) of House Ways and Means, confidently unveiled the package, then a nearly $200 billion grab bag of provisions they hoped to push to passage before Congress left on vacation.

With the joint release, Baucus and Levin signaled the skids were greased in both chambers for a bill that would tidy up an array of loose ends. Dozens of tax breaks benefiting businesses, individuals and special interests ranging from NASCAR tracks to Puerto Rican rum makers had expired at the end of 2009 and needed to be extended. Jobless benefits were set to run out at the end of May. Governors from both parties were clamoring for more federal aid to fill their budget gaps.

A deadline was looming, too, for the "doc fix," a patch that prevents doctors who see Medicare patients from absorbing a sharp pay cut. Baucus and Levin proposed to postpone the pay cut, set to take effect next week, until 2014, at a cost of $65 billion.

The package would raise nearly $58 billion in new taxes, including a new spill liability tax on oil companies. But it would nonetheless have added nearly $150 billion to budget deficits already driven to record levels by a deep recession and federal efforts to bail out the banking industry and prevent a global depression.

In the Senate, moderate Democrats quickly expressed their reservations. In the House, moderate Democrats rebelled.

House leaders responded by paring back the "doc fix," but rank-and-file Democrats wanted deeper cuts. Some called for a more rigorous examination of all emergency spending on the economy, saying 99 weeks of unemployment benefits may no longer be justified after four consecutive months of job growth.

"We've hit the wall. We've come to the tipping point where we're not going to do anymore," said Rep. Jason Altmire (D-Pa.), who said voters in his suburban Pittsburgh district are growing impatient with extra subsidies for the unemployed. "I think the case can be made that there are still more people who need jobs than there are jobs available. . . . But what's the limit? It can't be a permanent program."

In the end, House leaders trimmed a month from the income support program and scrapped subsidies for COBRA health insurance premiums. They also jettisoned $24 billion in state aid and cut the "doc fix" to 19 months.

House estimates put the cost of the final bill at $116 billion, and the Congressional Budget Office projected that it would add $54 billion to budget deficits over the next decade. Republicans, who have made the deficit a major campaign issue, derided it as "pork barrel spending wrapped in tax increases," in the words of Rep. Kevin Brady (R-Tex.). But the bill passed, 215 to 204, with every Republican but Rep. Anh "Joseph" Cao (La.) voting no.

In the Senate, the bill hasn't moved an inch. Aides to Senate Majority Leader Harry M. Reid (D-Nev.) had told reporters that he would try to extend unemployment benefits by voice vote Thursday night, but he never made such a move. Reid was noncommittal about when -- and if -- the Senate would consider extending the tax provisions once Congress returns June 7.

"We have so many things to do, and we are going to do our best to get the extenders done," Reid said.

For years, Congress has routinely renewed expiring tax breaks, even though the list of temporary provisions has grown ever longer and often benefits narrow special interests. Like the earmarks found in spending bills, these breaks seem small on their own and deliver important benefits to constituents -- helping to keep open a textile plant, for instance, or encourage the purchase of energy-efficient appliances.

But together they cost taxpayers billions every year. Alarmed by the shifting sentiment, some senators sought to rescue favorite tax breaks by seeking separate votes on the provisions. Sen. Charles E. Grassley (R-Iowa), who faces a tough reelection battle this year, sought a one-year extension of a biodiesel tax credit that expired Jan. 1, leading to an estimated 2,000 layoffs in Iowa.

Grassley was foiled by Baucus, who blocked a vote on the $854 million provision, arguing that the Senate couldn't play favorites when a Montana-friendly property-tax deduction -- worth $1.5 billion -- was also at stake.

"We have to do it together as a package," Baucus said on the Senate floor Thursday. "We can't do it singly, separately, tonight."

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