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Q & A with Jim Horney: Key Issues Facing Congress


In this podcast, we’ll discuss the key issues facing Congress during the lame duck session that began yesterday. I’m Michelle Bazie and I’m joined by Jim Horney, the Center’s director of Federal Fiscal Policy.

Jim, what are the key policy decisions at hand now that Congress is back in session?

Michelle, there are three big issues they’re facing. First, the tax cuts that were enacted in 2001 and 2003 will expire at the end of this year if Congress doesn’t do anything. So they’re going to be looking very carefully at what to do about the tax cuts. Number 2, unemployment insurance benefits; extended benefits that go beyond just the normal benefits when the economy is doing well, will expire at the end of November, and Congress will consider whether to extend those benefits or not. And then finally, Congress will need to at some point enact appropriations that provide funding for agencies through the end of the fiscal year, which is next September.

Well let’s start with the issue of extending the tax cuts that are scheduled to expire as we toast the New Year, particularly extending the tax cuts for family income above $250,000. What should Congress do?

Michelle, the question about what to do for the tax cuts for people with incomes over $250,000 is the key question. There is near unanimity that the tax cuts for people with incomes below $250,000 should be extended, at least right now, because letting those expire could be very harmful to the economy. But the question about above $250,000 is right up front, and what should happen there is we should let those tax cuts expire. Continuing tax cuts for people with incomes that high really doesn’t do very much for the economy at all, because people with incomes like that are going to save most of the extra money they get from the tax cuts. And we simply can’t afford to extend those tax cuts. If we end up making those tax cuts permanent, that’s a cost of $700 billion over the next ten years. When we’re facing large deficits, it just wouldn’t make sense to extend them.

The second issue you mentioned was unemployment insurance. How important is it for Congress to extend emergency unemployment insurance benefits before they expire at the end of this month?

It’s absolutely crucial to do that, both because we have about 5 million people who would really suffer if those benefits expire or they’re not extended. Also we are facing a situation where we have very high unemployment, more than nine and a half percent. The economy is growing very slowly at this point. Extending those benefits puts money in the hands of those people, which they then spend, which then helps to boost economic growth, and actually creates jobs, so that we will start getting that unemployment rate down. In recent decades, we have never let the extended benefits expire when unemployment was above 7.2 percent. Right now it’s at 9.6 percent, and yet we have people saying we should let these benefits expire. It’d be harmful both for the families that will not get the benefits and for the economy.

What about the upcoming appropriations process?

Big programs like Medicare, Social Security, the funding for that doesn’t come through annual appropriation, but the basic money to run the operations of government, to run the Defense Department, FBI, and so on, comes from annual appropriations. Those appropriations for this fiscal year, that started October 1st, have not been provided for the full year, they’re simply being provided on a temporary basis. And that temporary funding runs out December 3rd. At some point, Congress is going to have to provide the appropriations to run the government through next September. The fear is that in this lame duck, they may not be able to reach agreement on that full-year funding level, and it’s all too likely they’re simply going to extend the so-called continuing resolution over until next February and let the next Congress worry about that.

Thanks for joining me, Jim. Of course, the Center will continue following what goes on in this lame duck session, and in the next session.