By Mike Lillis - 05/12/11 04:50 PM EDT
The leading House Democrat is charging GOP leaders with backtracking on last year's bipartisan tax-cut deal.
Minority Leader Nancy Pelosi (D-Calif.) said Thursday a Republican bill granting states greater flexibility to spend unemployment insurance funds on other things, including tax cuts, undermines December's agreement to extend the George W. Bush-era tax rates for the wealthy.
"It should never even have been connected," she said, "but it was part of the package, and now they want to renege on that part of the package."
With the expiration of the Bush tax cuts looming in December, President Obama and Senate Minority Leader Mitch McConnell (R-Ky.) cut a deal to extend those cuts by two years for all Americans, including the wealthiest. The agreement drew howls from liberal Democrats, including Pelosi, who wanted the cuts to expire for those earning more then $250,000 a year.
Democrats didn't leave the negotiating table empty-handed, however. McConnell and the Republicans agreed to extend long-term unemployment insurance through the end of this year — a provision unpopular among many conservatives, who say the extended benefits are a disincentive for the unemployed to seek work. The White House estimates the extension will prevent 7 million people from losing their benefits this year.
Under the GOP's JOBS Act, states would be given much more flexibility to spend the remaining $31 billion in unemployment funds approved in December. They could continue making payments to the unemployed; use the funds to prevent the unemployment tax from going up; begin paying off federal unemployment loans; or subsidize wages to promote new hiring, the Republican supporters suggest.
During a Ways and Means markup of the bill on Wednesday, Rep. Dave Reichert (R-Wash.) said the bill "creates jobs, but creates them in a different way."
"We have to trust states to make the right decisions," he said.
But Democrats argue the bill would erode the safety net supporting the millions of people still struggling to find work amid the economic downturn.
"You call that giving flexibility to the states, I call that not keeping a promise to America's workers," Pelosi said. "It's also a great sign of disrespect for people who have to collect unemployment insurance. As if they prefer to do that than have a job."
Pelosi also noted that unemployment benefits provide a significant boost to the still-fragile economy. Mark Zandi, chief economist at Moody's Analytics, for instance, has estimated that unemployment benefits return $1.61 to the economy for every federal dollar spent. Making the Bush-era tax rates permanent, by contrast, returns just 32 cents on the dollar, Zandi found.
"It's not just about those workers," Pelosi said. "If they don't get those benefits, they don't spending that money, they don't inject that demand into the economy [and] they don't create those jobs."