The number one issue on everyone’s mind on Capitol Hill is JOBS. The House passed a major $150 billion jobs bill in December 2009, but the Senate has been working on its own version – which many had hoped could be a bipartisan package.
However, late last week a bipartisan coalition fell apart after Senate Majority Leader Harry Reid (D-NV) decided to scale back the Senate’s job legislation.
Deal … No Deal?
Here’s what happened: For several weeks, Senator Max Baucus (D-MT), chairman of the Finance Committee, and Senator Charles Grassley (R-IA), the panel’s senior Republican, had been working – with Reid’s blessing – on a large jobs bill. At the start of last week, the White House and Senate Democrats thought they had enough bipartisan support to move forward with the $85 billion jobs package for a vote on February 22.
However, when the details of the package were announced last Thursday, some liberal senators expressed fierce resistance – saying they preferred the much more ambitious $150 billion jobs bill that passed the House last December, which included large increases in unemployment benefits and new spending on infrastructure.
In response to the outcries from liberal senators, Reid hastily pared back the proposed Baucus-Grassley bill to just four popular provisions totaling $15 billion. Reid explained that this would allow the Senate to pass a simple jobs bill quickly, while pledging to “revisit the other issues” in future legislation.
This move, however, caused Republicans to object because they thought they had reached a deal with Reid and the Senate Finance Committee Democrats on the Baucus-Grassley $85 billion package.
Will the Reid Bill Create Jobs?
Reid’s $15 billion bill is not sufficient to create a large increase in hiring, some economists said. “It is better than nothing, but it ought not be confused with a solution to the jobs problem,” said Harley Shaiken, a professor at the University of California, Berkeley, who cited the need for incentives for businesses to raise wages and aid to cash-strapped states.
The key provision in the Reid bill is $13 billion in credit for businesses that hire new employees, originally co-authored by Senator Orrin Hatch (R-UT) and Senator Charles Schumer (D-NY).
The Congressional Budget Office estimated that the proposal, which would eliminate some payroll taxes on new hires and give businesses a $1,000 tax credit for hires that stay on at least a year, would result in 180,000 new jobs. By comparison, economists estimate that more than 8 million jobs have been lost since the recession began.
Lawrence Mishel, president of the more liberal Economic Policy Institute, said the credit would benefit companies that bring on new hires, even if the businesses do not expand payrolls, so companies engaged in regular turnover might benefit as opposed to those that actually increase their number of employees.
There is no up-front cash incentive for businesses making a hire; instead, the cash comes later in the year, in the form of $1,000 for employers who retain new hires.
“You’re spreading a small amount of money over a large amount of activity, so on average, you're not providing much incentive whatsoever,” Mishel said.
Some Republicans and Democrats believe the Reid legislation could fall short of the 60 votes needed to proceed, possibly along the Senate’s 59 - 41 partisan lines.
Therefore, faced with possible defeat on President Obama's top priority issue for this year – job creation – Democrats are privately discussing ways to regroup before a planned February 22 vote on Reid’s slimmed-down legislation.
When Congress returns on February 22, senators will need to decide whether they want to support a modest, scaled-back jobs bill (Reid) or a broader, more far-reaching jobs bill (Baucus-Grassley). Many will be watching to see if some Republican senators will support Reid’s smaller bill, as is … or will try to restore major portions of the Baucus-Grassley proposal by introducing amendments.
The critical battle might be determining what provisions would actually create jobs to help kick-start an economy.
SHRM prediction: A jobs bill will pass the Senate and reach the President’s desk for signature. This means every HR professional needs to know what’s in the final law – and how to implement it.
There will be a special session on the jobs bill at the upcoming Employment Law & Legislative Conference on March 17 – 19.
See charts that follow:
Status of Jobs Bill in the Senate
Just hours after Sens. Max Baucus (D-MT) and Charles E. Grassley (R-IA) proposed a package of business incentives and unemployment assistance, Senate Majority Leader Harry Reid (D-NV) said he would bring only a few of the measures to the Senate floor for a vote on Feb. 22.
Payroll tax exemption
Employers would be exempted from paying Social Security payroll taxes for every worker hired this year after being unemployed for at least 60 days. Employers would also get a $1,000 income tax credit for every new employee retained for 52 weeks, to be taken on the employer's 2011 income tax return.
Price tag: $13 billion over 10 years.
Extension of expiring tax provision
The government would continue to offer energy tax credits for home efficiency and alternative fuel vehicles, and other tax provisions that deal with research and development, depreciation for certain improvements, new markets and multinational companies' overseas business.
Price tag: $31 billion over 10 years.
Conversion of tax-credit bonds
Certain school and energy projects would be allowed to replace their tax-credit bonds with Build America Bonds. The former provides a federal tax credit instead of paying interest; the latter guarantees a portion of the interest will come directly from the U.S. Treasury.
Price tag: about $2 billion over 10 years.
Unemployment insurance extension
Increased unemployment benefits and the government's 65 percent COBRA premium subsidy would continue through May 31. Currently, they will expire Feb. 28.
Price tag: $25 billion over 10 years.
Reauthorize the Highway Trust Fund
The fund would receive $19.5 billion from the government's general fund, and the highway fund would stop making annual payments to the general fund as reimbursement for tax-exempt users of the highway program, such as state and local fleets and transit providers.
Price tag: No revenue effect.
Pension funding relief
Single-employer and multiemployer pension plans that suffered significant losses in the recession would get temporary funding relief.
Price tag: $6 billion over 10 years.
Medicare 'Doc Fix'
Extends for seven months a formula for paying doctors who see Medicare patients. The formula expired at the end of 2009, and doctors face a 21 percent reduction in payments.
Price tag: About $10 billion over 10 years.
SOURCE: Senate Finance Committee