March 21, 2012
By Alison Acosta Fraser
As the clock counts down toward Christmas, Congress still has major unfinished business to attend to. Not that we should be surprised. Emblematic of a resoundingly disappointing year, the last remaining issue to be resolved directly affects the pocketbooks of Americans.
Just days from now, the payroll tax "holiday" will expire. At the same time, fees for physicians and hospitals providing Medicare services will be severely cut and additional weeks of unemployment benefits for long-term unemployed will run out. It's not like these expirations were unexpected. These issues have been kicking around on the Congressional "to do" list since last December.
So now the debate has taken on a new degree of political theater. To its credit, the House passed a bill that, while not perfect, would at least prevent the looming tax hike for all working Americans, extend additional unemployment benefits and prevent cuts to Medicare providers with another "Doc Fix" for a full year. Besides these three key policies, the House also included some policies helpful to job creation as well as an important change to fix Medicare's finances, thus strengthening it for seniors today and tomorrow. This change is crucial to tackling the nation's largest and most pressing fiscal issue - our entitlement crisis.
Somehow, this was too much to do for the Senate. Unable to get the job done right, they passed a measly two-month extension of these three policies and quickly got out of Dodge, a.k.a. the nation's capital. Somehow, this is supposed to reassure us that Senate Majority Leader Harry Reid (D-Nev.) and the rest of his Senate colleagues are able to do the people's business.
This two-month extension is terrible policy. For example, working Americans have no assurance that they will not have a tax hike when the two-month extension expires. Plus, this will actually add costs and complexity for the nation's employers by requiring additional changes to their payroll systems to accommodate a potential series of changes based on when the Senate and the House do finally come to agreement. The short-term punt will be especially burdensome to smaller businesses who generally have "off the shelf" payroll applications or who still do payroll by hand.
And, to make things even more complicated, the Senate shortcut version adds even more layers of complexity for what should be a simple extension. The Senate bill limits the amount of income that qualifies for payroll tax relief so that upper-income earners don't get more than their "fair share" of the tax relief during this brief two-month period. Even a "simple" kick-the-can-down-the-road piece of legislation was infused with a class warfare mentality.
Another example of the Senate's twisted logic is that the Senate bill would be paid for by increasing fees on Fannie Mae and Freddie Mac, the government-sponsored housing behemoths now in federal conservatorship after going belly up during the 2008 financial crisis. The fees are not necessarily bad policy as they could provide better capitalization, reduce taxpayer risk and exposure and make private lenders more competitive. However, in true Washington fashion, these fees would not be used to shore up Fan and Fred's atrocious financing, but instead would be used to pay for more spending and to offset the costs of avoiding a tax hike.
So enter, stage right, the political theater. Rather than remain in Washington and work through the differences through the regular order, Reid sent senators home for the holidays. Congress should finish its work now by settling these three remaining policies for the duration of next year. The Senate should come back and give the nation a real gift - showing that it is up to the task of completing at least the simplest tasks before slinking out of town.
Alison Acosta Fraser is director of the Heritage Foundation's Thomas A. Roe Institute for Economic Policy Studies.
First appeared in The Milwaukee Wisconsin Journal Sentinel
Entitlements, Taxes & Spending Initiative of the Leadership for America Campaign
Alison Acosta Fraser
Senior Fellow and Director of Government Finance Programs
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