December 12, 2011 04:00 PM
By Candi Wolff, Executive Vice President, Global Government Affairs, Citi
With nine Appropriations bills not yet passed, a Continuing Resolution (CR) that expires December 16, extended unemployment benefits and a payroll tax holiday on the brink of expiration, as well as the so-called "doc fix" - Medicare reimbursement rates for doctors - looming, many will be surprised to learn that Congress will likely check off its list long before DC observers get through their own holiday shopping.
It looks as though the majority of the Appropriations bills will be dealt with in the form of an omnibus spending bill, leaving unemployment, the doc fix, and payroll to deal with. With unemployment hovering at 8.5 percent, Congress will be hard-pressed to let unemployment benefits or the payroll tax holiday expire. Analysts predict that expiration could reduce GDP growth between 0.7 - 1 percent in 2012. In this fragile economy every little bit helps, and Members cannot be seen as doing anything to impede economic growth. Moreover, Members may not want to return home to millions of constituents whose unemployment checks ran out during the holidays.
The good news is that leadership on both sides and the White House seem to agree on the benefits of extending the payroll tax break. The bad news is that neither side has been able to agree on how to foot the bill.
After competing bills to extend the payroll tax failed in the Senate, House Republicans introduced a bill that extends the payroll tax cut, unemployment insurance, and the doc fix. This legislation will be paid for through limiting benefits to wealthy Medicare recipients, increased fees on mortgage lenders, and freezing salary increases for federal employees.
While this bill is unlikely to pass the Senate in its current form, it is viewed as a substantive offer and therefore a jumping off point for a real negotiation. Ultimately, a final bill may require a large number of House Democratic votes to offset the possible defection of conservatives who either do not believe the economic benefits of the payroll tax are significant or oppose an extension of unemployment benefits.
All signs point to Congress checking off its list and delivering presents - not coal - to American taxpayers this holiday season. Should Congress head home without acting, we expect pressure from constituents will push Members to extend both provisions when they return in January. At this point, however, we are holding out hope to add "bipartisanship" to our list of holiday miracles.