Week Ending February 17, 2012
The Obama Budget: A Blueprint for an Economy Built to Last
President Obama submitted to Congress his proposed budget for Fiscal Year (FY) 2013, calling it “a blueprint for an economy that is built to last – one built on American manufacturing, American energy, skills for American workers, and a renewal of American values.” To further his goal of a sustainable economy that shifts the focus away from deficits and towards jobs, the Obama budget calls for increased investments in top domestic priorities, more progressive tax policies, as well as making a down payment on reducing the deficit.
The $3.8 trillion Obama budget plan makes job creation and sustaining the economic recovery its top priority by calling for important investments in community colleges, job training, infrastructure, manufacturing, and research and development. The budget acknowledges the tight spending caps imposed by Congress last summer, and while some federal programs would experience increases, others would be flat-funded or sustain cuts if the plan were to be implemented.
The budget plan calls for $1.5 trillion in increased taxes over 10 years, including imposing new taxes on the wealthy and eliminating many corporate tax loopholes to generate much needed revenues. It includes expiration of the Bush tax cuts for top earners, an increase in estate taxes, and higher tax rates on investment income by implementing the “Buffet rule,” which would ensure that wealthy investors like Warren Buffet pay at least the same tax rate as their secretaries.
The Obama budget makes a down payment on reducing the deficit over time, cutting it from $1.3 trillion in FY 2012 to $704 billion in FY 2022. As a percentage of the Gross Domestic Product, the deficit would fall from 8.5% to 2.8% over the same period. The President’s budget also counts more than $800 billion in savings from the wars in Iraq and Afghanistan and uses the money for new domestic investments. As a result of the increased revenues and savings, it avoids the need for harmful across-the-board spending cuts that would otherwise come in January 2013.
Congressional Republicans immediately panned the Obama budget plan, calling it a “charade” and "campaign document." AFSCME President Gerald W. McEntee said the Obama budget is right to put jobs and the middle class first, and criticized Republican leaders who threw a temper tantrum “in an attempt to distract voters.” Both houses of Congress are expected to turn their attention to advancing their own budget plans, which will be produced by the House and Senate Budget Committees, although Senate Majority Leader Harry Reid (D-NV) has said no Senate vote is expected this year on a Senate budget. The House is expected to produce a budget similar to Budget Chairman Paul Ryan’s (R-WI) draconian budget that it approved last year.
For a more detailed summary of President Obama’s FY 2013 budget, click here.
Congress Passes Unemployment Insurance/Payroll Tax Bill
Today, by a vote of 293-132 in the House and 60-36 in the Senate, Congress passed legislation (H.R. 3630) that will extend until the end of the year unemployment benefits and the payroll tax cut, and avert a sharp drop in physician reimbursements under Medicare (“doc fix”). The breakthrough was due to House GOP leaders’ sudden announcement earlier in the week that they would agree to a bill that would continue the payroll tax cut without paying for its $100 billion cost. We expect both the House and Senate to vote on the bill today, and that it will pass both houses of Congress.
The agreement is a mixed bag. It achieved a priority of AFSCME’s, continuing federal unemployment insurance (UI) benefits without a mandatory education requirement to qualify for benefits. It also includes significant funding for reemployment services to UI claimants. A provision allowing states to require mandatory drug testing of all applicants for UI benefits was substantially scaled back. However, Republican legislators insisted on the inclusion of a program in which up to 10 states could secure a federal waiver allowing them to use state UI trust funds for employer wage subsidies and to waive the merit staffing rule to allow entities other than the state UI agency to administer the program. Because it lacks important protections and waives the longstanding merit staffing rule, the provision is significantly more sweeping than the administration’s Bridge to Work proposal.
The provisions in the bill that pay for the UI extension and doc fix are also problematic. On the positive side, proposals to cut the Child Tax Credit and increase premium costs for Medicare recipients were dropped. However, GOP leaders adamantly resisted paying for the bill with a small surtax on the wealthy. As a result, although an original proposal to increase pension contributions for current federal employees was dropped, the bill includes a 2.3% increase in pension contributions for new federal employees. It also includes a requirement that health care providers take on more of the costs for patients’ failure to pay what they owe, and a $5 billion reduction in funding for the Affordable Care Act’s prevention fund.
House and Senate Take Two Different Roads in Moving Highway Bill
The House will leave this week with its leadership lacking the support they need to pass a massive surface transportation bill (H.R. 7). The five-year, $260 billion package was brought to the floor this week after it was rushed through three committees on mostly partisan votes. The 979 page bill is so controversial and has so many problems that the House leadership ultimately split it into three separate bills in an effort to conjure up enough votes.
H.R. 7 would slash transportation jobs, undermine transportation investments, cut overall spending and impose privatization of transportation services on states. Specifically, it would severely harm public transit, leading to layoffs, fare increases and service cuts; force state departments of transportation to privatize their design and engineering services; take away health and safety protections for workers who transport and handle hazardous materials; allow states to privatize interstate rest areas; and slash federal employee pensions to pay for the bill. Over 300 amendments are pending consideration, but it is unclear which will actually be brought to the floor for a vote. One amendment of particular concern to AFSCME is being offered by Rep. Richard Hanna (R-NY), which would require state departments of transportation to utilize private companies on all of their highway projects.
The Senate is working on a more bipartisan bill. The Senate’s two-year, $109 billion bill (S. 1813) would maintain surface transportation funding at current levels. It improves passenger safety and advances training programs for transportation workers. S. 1813 gives large transit agencies flexibility when spending federal money, which will help to prevent fare increases, layoffs, and cuts in service during an economic crisis. Sen. Charles Schumer (D-NY) successfully added a one-year extension of the mass transit commuter tax subsidy. This provision would increase the monthly cap from $125 to $240 on employer-provided mass transit commuting benefits. This provision ensures parity between the maximum value of the federal tax exclusion for mass transit commuting benefits and parking benefits. The federal tax exclusion authorizing parity for mass transit commuting benefits expired on December 31, 2011. The Senate is not expected to complete action on the bill before leaving for the President’s Day recess.
The current transportation law expires on March 31, leaving Congress very little time to pass bills in the House and Senate, work out their differences, and send a finished product to the President. President Obama issued a statement that he would veto the House bill if it is sent to his desk in its present form. He has expressed support for the Senate’s bill.
President Signs Aviation Bill
President Obama signed into law the Federal Aviation Administration’s (FAA) Modernization and Reform Act of 2012 on February 14. The legislation took five years to pass and 23 short-term extensions to keep the agency operating. The law will provide $15.9 billion annually for federal aviation programs through FY 2015, including $3.35 billion for the Airport Improvement Program, which provides grants for planning and development of public airports, and $9.7 billion for FAA operations.
House Panel Approves Timber Revenue Bill
By a vote of 26-17, a House panel approved legislation (H.R. 4019) that would require rural communities with national forest lands to generate revenue through the use of timber sales, recreation or other projects. The bill would replace the direct federal payments these counties have been receiving for the past decade under the Secure Rural Schools (SRS) program. Congress began compensating these counties in the late 1990s when the market for timber fell, thus ensuring that the counties could continue to fund schools and road projects. Counties were given federal money based on historical timber sales. Supporters of H.R. 4019 believe that such a program is no longer fiscally sustainable. The vote was mostly along party lines, with just one Democrat voting to approve the measure. H.R. 4019 would also reauthorize the Payment in Lieu of Taxes program, which compensates about 2,000 communities in 49 states for lost local property tax revenues on federally-owned land. Funding for the program in FY 2011 totaled $375 million and will expand to a projected $387 million this fiscal year.
86 Million Have Already Benefitted From Health Reform Law’s Free Preventive Services
Under the Affordable Care Act (ACA), private health plans and Medicare are required to provide preventive services without a co-pay. This includes screenings for cancer, diabetes and other diseases, immunizations such as flu shots, annual wellness visits for women, children and seniors, and other services. Since taking effect in 2011, the U.S. Department of Health and Human Services (HHS) reports that 54 million Americans who are enrolled in private health insurance plans, mostly through their employers, have already received preventive care without charge as a consequence of the ACA. Another 32.5 million Medicare beneficiaries have also received at least one new preventive benefit. While most of the law will not be implemented until 2014, it is already delivering benefits for millions of Americans.
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