Spending, Taxes Top Agenda of 'Lame Duck' Congress

Published Nov 11, 2010. By John Fritze. In USA Today.
WASHINGTON — Two weeks after Republicans made big gains in the midterm elections by vowing to reduce government spending, lawmakers return to Capitol Hill and face a bevy of pressing legislation that, if approved, would add more than $250 billion to the deficit in 2011.

From expiring income tax cuts that affect three-quarters of American households to billions of dollars in unemployment benefits that will run out unless Congress acts, the proposals on the agenda for the "lame duck" session that begins Monday underscore why cutting spending will be a long, hard process.

"One result of the campaign is there are some wildly optimistic expectations for how quickly the deficit can be brought down," said Robert Bixby of the fiscal watchdog Concord Coalition.


Spending and taxes will dominate the session as lawmakers decide what to do about income tax cuts set to expire in December. Republicans, such as Rep. John Boehner of Ohio, in line to become House speaker next year, want a permanent extension. President Obama favors a fix only for families earning less than $250,000.

White House adviser David Axelrod indicated in an interview this past week with the Huffington Post that the administration is open to temporarily extending the tax cuts for all income levels. An extension would cost $168 billion in 2011 alone, according to the non-partisan Congressional Budget Office (CBO).

A one- or two-year extension is the most likely outcome, said Roberton Williams, a tax expert with the non-partisan Urban Institute. But Scott Hodge, president of the non-partisan Tax Foundation, said lawmakers may not reach consensus and could instead let the new Congress deal with the issue early next year.

"While the president and Republicans may be inching toward an agreement, I'm hard pressed to see many of the politically stung Democrats buying into such an agreement," Hodge said.

Congress reconvenes to work on unfinished business — including a spending bill to keep the government running — days after a bipartisan panel focused on debt reduction recommended $3.8 trillion in savings over the next decade.

Republicans won more than 60 House seats Nov. 2 partly by vowing to reduce taxes and trim government spending. The budget deficit for fiscal year 2010, which ended in September, was $1.3 trillion.

In addition to the income tax cuts, Congress faces immediate decisions this month that could add to the deficit, including:

•Lawmakers have until year's end to fix the alternative minimum tax, or AMT. About 23 million new families will be hit with tax bills that, on average, would be $3,900 higher if the AMT is not adjusted for inflation. A one-year AMT fix costs $70 billion of the $168 billion for the extended tax cuts, the CBO estimates.

A bipartisan group of lawmakers, including House Ways and Means Democratic Chairman Rep. Sandy Levin and the committee's top Republican, Rep. Dave Camp, both of Michigan, vowed to address the AMT so that "not one additional taxpayer faces higher taxes."

•Up to 2 million Americans will lose long-term unemployment benefits if Congress does not act by the end of December. The last extension became controversial, as Republicans resisted because the measure was not paid for. The Economic Policy Institute, a labor-backed economic think tank, estimates it would cost $65 billion to extend the benefits through 2011.

•Doctors who care for seniors on Medicare face a 23% cut in the amount the federal government reimburses for care starting Dec. 1 unless Congress acts. Extending the current reimbursement rates for one year would cost about $15 billion, estimates the Kaiser Health News.

The American Medical Association says the cuts would prompt doctors to drop Medicare patients. The association's president, Cecil Wilson, said he is sensitive to the challenges facing Congress but, he said, "the longer Congress procrastinates on this issue, the bigger the price tag for America's taxpayers."