For what feels like the 624th time this year, the federal government on Friday will run out of money unless Congress acts. This deadline hasn’t gotten much ink because a) we’re all tired of writing the same fishbowl, government shutdown story, and b) congressional negotiators for once in their lives are on track to sign off on a bipartisan omnibus that would fund the government through the rest of the fiscal year, thus avoiding more of these embarrassing showdowns.
So, what’s the problem? This time, the hitch is actually unrelated to the appropriations process. It’s not about cuts to programs or savings in spending. Bizarrely enough, this time it’s about preventing a payroll tax hike. Should be a no-brainer, right, especially for all those anti-tax Republicans? Not so fast.
The fight has been over how to pay for a payroll-tax holiday. If nothing happens, the tax will snap back to 6.2% from 4.2% on Dec. 31 – something President Obama and Democrats have vowed they will not let happen. Keeping it at the current rate would cost $120 billion. Democrats would like to cut the rate further to 3.1%, for an additional $60 billion.
Also on the docket – and likely to be rolled into the same package – are an extension of unemployment benefits, expected to cost upwards of $55 billion; an Alternative Minimum Tax patch that will cost $135 billion; and a fix in the fees that Medicare pays to doctors, which is estimated to cost $39 billion. All told, more than $400 billion worth of legislation is on the table. Congress has come to the brink of a shutdown for less: Remember last spring when at the 11th hour a deal was struck to avert a shutdown over $39 billion in cuts to the 2011 budget?
The current fight has been over how to pay for these measures. Republicans insist they must be paid for – not adding to the deficit – and have suggested cuts to Medicare benefits. Democrats have rejected this out of hand and have, instead, put forth a surcharge on millionaires and using the savings from not fighting the wars in Iraq and Afghanistan. Republicans reject the first as a tax hike and the latter as smoke and mirrors accounting as that money has yet to be spent. On the other hand, all congressional accounting is a form of smoke and mirrors – neither the AMT or Medicare doctors’ payments would need to be fixed if their formulas weren’t fundamentally broken, thus warranting annual patches.
How do this fight and the $1 trillion omnibus relate? Democrats are considering slow walking, or even refusing to sign the omnibus conference report, unless Republicans start to take real action on the tax extenders package, several congressional Democratic sources said. House Republicans on Tuesday are expected to pass their own version of the bill, which Senate Democrats have declared dead on arrival in the upper chamber. The House might be tempted to adjourn and head home for Christmas, thus forcing Senate Dems to pass their version, unless Democrats keep them in Washington, and the omnibus comes in handy for that.
On the other hand, government funding runs out on Friday, so that’s a ticking clock. Democrats are betting that, if worst comes to worst and the shutdown actually happens, they won’t get blamed given the number of times Republicans have cried wolf. Especially not when they can claim to be protecting the middle class from a tax hike — an argument Republicans have been struggling with in recent weeks. And the prospect of a shutdown could have implications for the 2012 GOP field. I wonder what Newt Gingrich, who perilously lost his own shutdown argument with Bill Clinton in the 1990s, would make of it?