Partisan 'game of chicken' over jobless benefits, tax cuts

Every week, another 80,000 jobless workers run out of their unemployment benefits.

They then either rely on a spouse's earnings, find a job, use up more of their savings and other assets, go on welfare, maybe get food stamps for a few months, head home to parents, or end up on the street.

That's because the leaderships of the Senate and the House are at loggerheads over extending unemployment benefits by 13 weeks.

"It's a big game of chicken," says Wendell Primus of the Center on Budget and Policy Priorities (CBPP), a Washington think tank.

Neither Democrats nor Republicans want to seem heartless over helping out those who have lost their jobs. Both parties have an eye on congressional elections in the fall.

But the Republican leadership of the House also wants to get through a new package of tax cuts, and it is using the unemployment-benefit extension for leverage to win its passage in the Democratic-controlled Senate.

Because of the extra difficulty of finding work in a recession, Congress usually extends by 13 weeks the 26-week limit for unemployment benefits set by most states. Disputes in Congress over a stimulus package for the stalled economy have already delayed action this time for five months.

Early this month, the Senate unanimously passed a bill extending the jobless benefits. How was this bipartisan cooperation achieved?

Unable to get sufficient Republican votes to pass what he considered a reasonable stimulus package that included the extension, Senate majority leader Thomas Daschle of South Dakota put forward the extension provision alone.

To ensure Republican support, it didn't include extra features that many Democrats wanted, such as raising weekly benefits by $25 and making more of the newly jobless eligible for benefits.

In contrast, the House passed on Valentine's Day a revived Republican-sponsored bill that includes, beside the benefit extension, tax cuts and increased spending costing $154 billion over the next decade.

Here's where the politically risky game of chicken arises.

House Ways and Means Chairman William Thomas of California hopes to force Senator Daschle into sending the bill to a conference committee from both houses, where Republicans might succeed in keeping some of their proposals in the combined bill that emerges.

Congress reconvenes today after the Presidents' Day holiday. So far, Mr. Daschle hasn't taken the conference bait.

Republican leaders had argued that their tax cuts were an insurance package needed to assure a vigorous recovery. But the nonpartisan Congressional Budget Office issued a study that ranked all but one of the Republican measures as packing little if any short-term economic stimulus.

Further, the economy appears to be picking up without extra federal help.

Now the Republican tune has changed somewhat.

"Businesses still need incentives to invest and to create jobs," Mr. Thomas stated. The more than 2 million Americans who have lost their jobs since the recession began last March "need more than unemployment, more than welfare. They need paychecks."

To the Democrats, though, the House package is just more tax breaks for corporations and the already prosperous. The close connections of the White House to Enron Corp. may make the Democratic charge more persuasive to some voters.

About 88 percent of the cost of the House package in the next six years consists of tax cuts.

Among these, the acceleration of the income-tax-rate cuts in last June's tax-reduction bill would cost $51 billion over 10 years, the CBPP calculates. The 27 percent tax rate, now scheduled to fall to 25 percent in 2004 and 2006, would happen right away. These savings would go to the top one-quarter of tax filers, with the largest gains for the top 5 percent.

Another $40 billion would go to business in the form of faster tax write-offs on various purchases and investments and the elimination of much of the corporate "alternative minimum tax."

This latter provision created a political storm as part of earlier versions of the tax-cut bill, because a number of corporations would receive billions of tax credits. Enron would get $254 million.

The 13-week extension of unemployment benefits would cost $13 billion in its first years. But $9.5 billion of that would come back with higher payroll revenues as the recovery picked up speed.

Though all but one Republican in the House voted for the combined tax-cut/unemployment-benefit measure, Washington observers say the House Republicans are divided over the merits of the Thomas strategy.

It's easy to see why.

Republicans may talk of "philosophical differences" in the bills.

Democrats, though, will no doubt paint the Republicans as the party of the rich and of powerful corporations. They will say further tax cuts will worsen the federal budget deficit, endangering Social Security.