Job Measure Blocked by Senate

Obama's $447 bln bill would have cut payroll taxes, funded infrastructure.

Opponents of President Barack Obama’s $447 billion jobs plan blocked the measure in the Senate, with two Democrats joining Republicans to derail his prime proposal to help turn around the struggling economy.

The tally on the test vote was 50-49, falling short of the 60 needed to advance the measure and shelving it in its current form. Voting was completed in the evening as the roll call remained open to let Senator Jeanne Shaheen, a New Hampshire Democrat, return to Washington to vote in support of the plan.

The broad plan includes cuts in payroll taxes for workers and employers and provides new funding for roads, bridges and other infrastructure.

Senate Minority Leader Mitch McConnell called the measure a “lousy idea” that relies on proposals similar to 2009’s $825 billion stimulus, an effort he said that failed to work.

“If voting against another stimulus is the only way we can get Democrats in Washington to finally abandon this failed approach to job creation, then so be it,” said McConnell, a Kentucky Republican.

Senate Democratic leaders last week revised the president’s initial proposal, partly to try to pick up more support within their party. That scrapped Obama’s method of paying for the jobs plan, including higher taxes on families making more than $250,000 a year. Senate leaders substituted a 5.6 percent surtax on people making at least $1 million annually.


 
'Tax Gimmicks’

Even so, Democratic Senators Jon Tester of Montana and Ben Nelson of Nebraska opposed the plan. “I can’t support tax gimmicks that do little to create jobs” and don’t address the need for a bipartisan deficit-cutting plan, Tester said in a statement.

Before the Senate voted, Majority Leader Harry Reid accused Republicans -- who are trying to take control of the Senate and White House in 2012 -- of attempting to hamper the economy for political benefit. He said Republicans are opposing job-creation ideas they supported in previous years.

“Republicans oppose those ideas now because they have a proven track record of creating jobs, and Republicans think if the economy improves it might help President Obama,” said Reid, a Nevada Democrat. “So they root for the economy to fail, and oppose every effort to improve it.”


 
Pressing Ahead

Obama vowed to press ahead and seek to get individual provisions of his plan passed by Congress.

“Tonight’s vote is by no means the end of this fight,” Obama said in a statement. As they vote on each component “members of Congress can either explain to their constituents why they’re against common-sense, bipartisan proposals to create jobs, or they can listen to the overwhelming majority of American people who are crying out for action.”

The vote leaves Obama’s economic agenda in limbo because the political parties disagree about what should be done to lower the nation’s 9.1 percent unemployment rate, said Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington. Republicans seek permanent tax cuts and deregulation, while Obama and congressional Democrats want more federal spending and short-term tax reductions.

“The president’s jobs initiative is at the end of its legislative life -- not that it really had one,” Stretch said. He said the focus will likely shift away from jobs and toward the work of a congressional supercommittee that is tasked with cutting $1.5 billion from the federal deficit over 10 years.


 
Obama’s Plan

Obama proposes to create jobs by cutting payroll taxes for workers and employers by half, extending jobless benefits, providing aid to states for schools and emergency workers and boosting spending on public works projects such as roads and bridges. He also would provide tax breaks for employers to hire the unemployed.

The plan considered today would be financed by Senate Democratic leaders’ proposed surtax, which the U.S. Congressional Budget Office said would raise $453 billion.

Obama endorsed the leaders’ plan. He had proposed capping itemized deductions for individuals earning more than $200,000 a year and couples earning more than $250,000. He also proposed raising taxes on private equity firm managers, real estate investors and venture capitalists, and ending oil and gas subsidies.


 
‘Issues of Inequality’

The new method of offsetting the bill’s costs still ran into Democratic opposition. Senator James Webb, a Virginia Democrat, said he would vote to let debate start, but wouldn’t support the Senate jobs legislation as it was drafted. He said a tax on millionaires that is income-based fails to address real issues of inequality in the tax code. He said the best method to spread the tax burden would be to boost taxes on capital gains.

“The present proposal looks good at first glance; it sounds good on a TV bite, but in all respect to the people who put it forward, I do not believe it’s smart policy and it does not go where the real economic division lies in our country,” Webb said.

In the House, Obama’s plan also faces hurdles. Republicans who hold the majority oppose the tax increases, and party leaders there also have said it adds spending in many areas already bolstered in 2009’s economic stimulus measure.

House Republican leaders say some of Obama’s ideas, such as payroll tax cuts, are worth considering.

The Senate bill is S. 1660.



Bloomberg News

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