The long-debated extenders bill failed to pass the Senate yesterday by a wide margin (45-52). That’s good new for taxpayers because the bill contained $48 billion in new taxes, $126 billion in new spending and added $79 billion to the national debt.
Despite yesterday’s setback, Senate leaders are undeterred and released a new version of the extenders bill today. This latest version is essentially no different than the one that passed the House in late May and the bill that failed in the Senate yesterday.
Senate leaders did cut almost $21 billion from the cost of the new extenders bill so the total cost is now over $105 billion to make it more palatable for budget-conscious Senators. This is still too much spending, especially because a vast majority of the reduced spending is from a program that will require Congress to spend the money saved now in the near future.
Of the $21 billion savings, almost $17 billion of it comes from shortening the length of the so-called “doc fix” that prevents a reduction of payments to doctors that treat Medicare patients from 19 months to 6 months. That means the latest extension will run out again at the end of November. At that time Congress will have to go through this routine all over again to pass the doc fix so Medicare patients don’t lose their doctors. The reduced spending in the extenders bill is nothing but a budget gimmick because it just delays inevitable expenditures.
The latest extenders bill increases the tax hikes contained in the previous bill by another $3 billion. If this version passes the Senate, it will raise taxes by over $50 billion. Now is the worst possible time to raise taxes as the economy is trying desperately to get on its feet. Apparently Congress hasn’t got the message because it continues to place more weight on the economy that will only slow recovery.
The temporary delay of spending on the doc fix and the $3 billion in new taxes means the new extenders bill increases the deficit by $55 billion. This is $24 billion less than the version that failed in the Senate. This is small consolation because almost all of this spending will eventually be added to the national debt as soon as Congress gets around to extending the doc fix for a longer period of time.
Congress being what it is it couldn’t let an opportunity to add new spending to the bill even as it tries to get the cost down to make it politically more appealing. The extenders bill now includes and extension of the homebuyer tax credit through September 2010. The credit was supposed to expire at the end of June. This is more spending that is only delaying the inevitable downward readjustment of home prices that will come eventually, regardless of intervention from Washington.
It is easy to forget that there are a wide range of expired tax provisions that are the heart of the tax extenders bill. But the irresponsible spending that Congress has added the tax extenders has clouded reality. Its time for Congress to focus on top-priorities and stop trying to pass more spending by adding it to otherwise necessary legislation.