The $123 Billion Tab For Job And Tax Bill

The bill known as H.R. 4213, The American Jobs and Closing Tax Loopholes Act, may clear Congress in the next few days. It would extend eligibility for unemployment insurance benefits, COBRA health care tax credits and other critical programs that families and communities depend on through December 31, 2010. In other words, it would help millions of the unemployed. Another major part of the legislation would close tax loopholes for wealthy investment fund managers and foreign operations of multinational companies.

The goals of the programs may be noble, but they will cost taxpayers $123 billion over the next two years. None of this money is in the budget. It is hard to gauge how many times voters will countenance Congress increasing unemployment payments. The new bill provides for 52-week weeks of extended benefits. The Emergency Unemployment Compensation (EUC) program will be extended through the end of the year.

As usual, the its advocates and by The Congressional Budget Office have differing estimates on how much the bill will cost.   Late Friday, the CBO reported that the the legislation would increase the deficit by $123 billion for 2010 and 2011. That number rises to $141 billion for the 2010 to 2015 period. The agency said, “The bill would extend benefits under the unemployment insurance program, at a total cost of about $47 billion, and it would extend (for an additional six months) the increase in the federal share of Medicaid costs that was originally enacted in the American Recovery and Reinvestment Act of 2009.”

Like every other program on top of the President’s budget, an additional burden is placed on the Treasury to increase borrowing and, probably the cost of money. The CBO estimates that debt service for the American deficit will hit $700 billion in 2020. That makes the government’s ability to fund Social Security, Medicare, and Medicaid more difficult. An aging population will find that its retirement will be more expensive to fund. Some expect that some baby boomers will not get their “fair share” of entitlement programs.

The Administration and Congress have decided to help the unemployed short-term and those retiring in a decade will pay for it.

Douglas A. McIntyre