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Democrats' Proposals Add Up to Second Stimulus
Friday October 9th, 2009

WASHINGTON/FOX News -- Confronted with big job losses and no sign the U.S. economy is ready to stand on its own, Democrats are working on a growing list of relief efforts, leaving for later how to pay for them, or whether even to bother.

Proposals include extending and perhaps expanding a popular tax credit for first-time home buyers, and creating a new credit for companies that add jobs. Taken together, the proposals look a lot like another economic stimulus package, though congressional leaders don't want to call it that.

Democratic leaders in Congress and the White House say they have no appetite for another big spending package that adds to the federal budget deficit, which hit a record $1.4 trillion for the budget year that ended last week.

But with unemployment reaching nearly 10 percent, many lawmakers are feeling pressure to act. Some of the proposals come from the Republicans' playbook and focus on tax cuts, even though they, too, would swell the deficit.

"We have to do something for the unemployed, politically and economically," said Rep. Charles Rangel, D-N.Y., chairman of the tax-writing Ways and Means Committee.

The House already has voted to extend unemployment benefits an additional 13 weeks for laid off workers in the 27 states where the jobless rate is 8.5 percent or above. Senate Democrats reached a deal Thursday to extend the benefits an additional 14 weeks in every state. Both proposals are paid for by extending a federal unemployment tax.

Also on the table: extending subsidies for laid-off workers to help them keep the health insurance their former employers provided, known as COBRA. The current program, which covers workers laid off through the end of the year, costs nearly $25 billion.

Congressional leaders haven't settled on the length of an extension, or how to pay for it.

Several bills would issue extra payments to the more than 50 million Social Security recipients, to make up for the lack of a cost-of-living increase next year. One bill would set the one-time payments at $250, matching the amount paid to Social Security recipients and railroad retirees as part of the stimulus package enacted in February.

The payments would cost about $14 billion and would be paid for by applying the Social Security payroll tax to incomes between $250,000 and $359,000 in 2010. Currently, payroll taxes apply only to the first $106,800 of a worker's income.

House Speaker Nancy Pelosi, D-Calif., said she is also considering a Republican proposal to allow money-losing companies to use their losses to get refunds of taxes paid in the previous five years. Under current law, most companies can only use current losses to get refunds from the previous two years.

"The issue of a net operating loss carryback to five years rather than two is an idea that has some currency," Pelosi said.

Pelosi didn't offer specifics, but a similar proposal that was dropped from the first stimulus package had a cost of $19.5 billion.

Pelosi said she is also looking into extending and expanding a popular tax credit for first-time homebuyers. The credit, set to expire Dec. 1, allows first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000.

Pelosi said the credit could be expanded to people who already own homes, though she offered no details. Senate Majority Leader Harry Reid, D-Nev., has announced his support for extending the existing credit an additional six months.

"The question is, would that be just first-time homeowners or would you open it up to other purchasers of homes?" Pelosi said.

The program is scheduled to run for 11 months this year and cost a projected $6.6 billion. Extending or expanding the program would add to the costs.

Lawmakers are also working on proposals to award tax credits to companies that add jobs. Obama's economic team proposed a similar incentive during negotiations over the stimulus package enacted in February but the idea was abandoned amid questions over its implementation.

A proposal by Sen. Arlen Specter, D-Pa., would provide a $4,000 tax credit, to be paid out over two years, for each new employee. His office could not provide a cost estimate.

Pelosi said lawmakers need to hear from economists before settling on a package to create jobs. "What is it that we can afford? What works the fastest?" Pelosi said.

Rep. Dave Camp, D-Mich., the top Republican on the Ways and Means Committee, said: "The fact that they're putting forward all of these things is really an indication that the stimulus was a failure. It didn't work."

Congress passed a $787 billion economic stimulus package in February, providing tax cuts for individuals and businesses, relief for the unemployed, spending on infrastructure and aid to the states.

President Barack Obama and other Democrats are adamant the package has lessened the effects of the recession, saving jobs that would have otherwise been cut. Nevertheless, the unemployment rate rose to 9.8 percent in September, the highest since 1983. A total of 15.1 million people are unemployed, and 7.2 million jobs have been eliminated since the recession began in December 2007.

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