“Extenders” Bill Lives Up to Its Name
Legislation to extend tax breaks that expired last year, as well as expanded social safety net provisions and relief for doctors from a steep cut in Medicare payments, continues to languish in the Senate as lawmakers cannot agree on paying for the costs of the bill.
Consideration of The American Jobs and Closing Tax Loopholes Act (HR 4213) will drag into next week after a vote to end debate late last night failed to attract the necessary 60 votes. No Republicans voted for cloture in the 56-40 vote. Earlier in the day a GOP alternative that would completely pay for the extensions with spending cuts elsewhere failed on a 41-57 vote with only one Democrat joining Republicans.
The bill has become ground zero in the intensifying conflict between stimulating the economy and confronting the mounting debt. It is critical that the right balance be achieved between aiding the nascent recovery so that it can be sustained while also correcting a long-term debt trajectory that is unsustainable.
As we have argued here, the best solution is to finance short-term stimulus with longer-term offsets. That way the effects of the stimulus will be enhanced because creditors will be reassured that we are not adding to the long-term debt that is already a cause of great concern. We have also pointed out that jittery markets would be encouraged if the U.S. developed a credible fiscal plan now that would be implemented as the economy recovered. This would aid the recovery by keeping interest rates lower. Crafting a credible stimulus is key.
Democrats have scaled-back the bill several times in order to attract more votes, but those changes have consisted mainly of reducing the length of the extensions, which does nothing to reduce costs in the long run if they simply will be extended again down the road. CRFB called for offsets and provided some suggestions in a recent paper.
Congress must work together and design a package that gets the most bang for the stimulus buck in the short-term while not contributing to long-term debt. The balance is achievable if policymakers put aside partisanship and pursue real solutions.