Back in December of 2010 when Congress was faced with the imminent expiration of the Bush tax cuts, Democrats and Republicans made a pretty straight-forward tradeoff. President Obama would allow extended lower rates on top-tier income, anathema to liberals, in order to secure a moderately sized economic booster shot. The “Stealthy Stimulus,” as some dubbed it, came at a high price to Democrats, but the White House seemed to see its potential benefits to the recovery–and Obama’s re-election prospects–as paramount.
On Friday, the Republican-controlled House voted 293 to 132, to extend those same stimulus measures–unemployment insurance and a payroll tax holiday for 160 million workers–through the end of 2012, joined by the Democratically helmed Senate, 60 to 36. While 91 Republicans and 41 Democrats voted no in the House, and 30 GOPers, five Dems and one independent defected in the Senate, the tradeoff was less dramatic than the 2010 deal. Republicans won $5 billion in cuts to a preventive health fund established by Obama’s health care law and increased pension contributions for federal workers, as well as a reduction in the maximum duration of jobless payouts from 99 weeks to 73 weeks in the most hard-hit states.The legislation also included an annual measure to prevent a reduction in Medicare reimbursement rates.
While the package lacks the scope of the broad tax cuts favored by the GOP or Obama’s perennial spending proposals for infrastructure, manufacturing and R&D, economists predict it will have an appreciable effect this year. It contains what’s considered an efficient staple of Keynesian pump-priming: Giving money to people who are very likely to spend it–unemployment benefit dollars will fill gas tanks and buy groceries throughout the year. And while the payroll tax cut does not offer the same bang-to-buck ratio, an extra $1,000 is no small thing for $50,000-a-year wage-earner–or the Obama campaign’s communications outfit.
Republicans are well aware of this dynamic. “This is an economic relief bill, not a growth bill,” House Speaker John Boehner said in a statement Friday. “The only reason the provisions at the core of this measure are even necessary is because the President’s economic policies have failed.” Failed or not, the economy is beginning to pick up and Obama has just secured another 8 months of stimulus before voters deliver their final verdict on his first term.
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