Congress Finally Does Something

by Wendy Simmons | February 19, 2012 5:45 pm

investorpoliticsletters2 Congress Finally Does Something[1]After months of bickering and high drama on Capitol Hill over whether or not to extend the 2011 payroll tax cut, unemployment benefits and payments to Medicare providers, Congress passed a bill Friday that will extend all three of these elements for the rest of 2012.

The final legislation was basically a good deal all around: arguments over spending cuts and millionaires didn’t stymie the entire process, the GOP got a little of what it wanted and broadband access should get faster and more reliable.

Debates over spending cuts don’t have to block everything

It became clear Friday that this Congress can actually work together to pass legislation, even in an election year. Perhaps it is the record low approval rating of Congress[2] (only 10% of Americans currently approve of the work Congress is doing), combined with the slowly rising approval rating of President Obama[3] (now at 50% according to the New York Times) that finally scared the GOP into agreeing to this tax cut.

Whatever the case, it is a remarkable turnaround for a party that spent all of 2011 deadlocked over how to cut spending. The final legislation did not include any spending cut offset for the $100 billion cost of continuing to provide workers with a 2% cut to their payroll taxes. It appears that maybe the GOP actually believes its own ideology after all: that any tax cut is a good tax cut.

Spending cuts

In perhaps an odd twist, this Congress paid for the extension of unemployment benefits by limiting the compensation packages of their future colleagues. Under the agreement, new federal workers will have their pension benefits cut, but the existing federal workforce was spared.

Republicans can claim to be tough on the unemployed

While the Tea Party element of the Republican Party must be incensed that the GOP-controlled House finally caved completely on an unfunded tax cut, they did manage to limit the number of weeks that the unemployed can receive benefits. The 99 week limit was replaced by a 63 limit for most states (73 weeks for those in the states with exceptionally high unemployment rates). Although this may be discouraging for the long-term unemployed, it could have been much worse. Republicans were recently advocating for drug-testing to be a requirement of receiving unemployment benefits.

An extra bit of stimulus for all things wireless

Although the payroll tax cut was not paid for, Republicans did insist that the extension of unemployment benefits and the “doc-fix” be offset by new revenue or spending cuts. They got a little of both. Part of the legislation included the go-ahead for government to auction off airwaves to be used as broadband for the rapidly expanding use of mobile devices. These auctions are expected to generate $25 billion in new income. Even better, making wireless connectivity faster and more plentiful will surely be a boon for companies that sell these products. Apple (NASDAQ:AAPL[4]), AT&T (NYSE:T[5]) and Verizon (NYSE:VZ[6]) must be very pleased with this legislative deal.

The ‘millionaire’s tax’ remains the stuff of campaigns

Notably absent from the final compromise was any surtax on the very rich, an idea the Senate Democrats had been advocating for months. Republican leadership has been adamant that raising taxes on the wealthiest Americans was not an option. While a millionaires’ tax still has a lot of merit and support, the Democrats were right not to let the entire bill fail because they were not able to pay for it with a surcharge on the very rich.

The opinions contained in this column are solely those of the writer.

Want to share your own views on money, politics and the 2012 elections? Drop us a line at letters@investorplace.com and we might reprint your views in our InvestorPolitics blog! Please include your name, city and state of residence. All letters submitted to this address will be considered for publication.

Endnotes:
  1. [Image]: mailto:letters@investorplace.com
  2. record low approval rating of Congress: http://investorplace.com/investorpolitics/5-unpopular-things-that-are-more-popular-than-congress/
  3. slowly rising approval rating of President Obama: http://www.nytimes.com/2012/02/15/us/politics/economic-gains-give-lift-to-obama-in-poll.html
  4. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  5. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  6. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ

Source URL: http://investorplace.com/investorpolitics/congress-finally-does-something/
Short URL: http://investorplace.com/?p=131810