Our View: Congress faces big challenges on return
As the economy continues to creep along, Congress still is playing games on the federal budget and taxes. For the next five weeks, senators and representatives are on vacation. At least they won't be passing any new laws until September.
Congress, during its last day in session Thursday, did work out details of a stopgap budget measure it will pass when lawmakers return. That's to beat the Oct. 1 start of the new fiscal year. The continuing resolution mostly will maintain current funding for programs for six months, until March 31.
"They essentially have dealt with the appropriations that will be provided for all government funding through the first quarter of 2013," J.D. Foster said; he's a senior fellow in fiscal policy at the Heritage Foundation. "Both sides decided the fight wasn't worth it. Democrats and Republicans are getting ready for the November election."
Republicans, goaded by members elected in 2010 with tea party backing, have been saying they would cancel funding for the Affordable Care Act, parts of which will be intravenously fed into the economy in January. But the funding will continue. We asked Foster. "The continuing resolution will fund Obamacare under existing law," he said. "The president's signature would be needed on a resolution ending funding, and he won't do that" to his singular policy accomplishment and key election plank.
For Republicans, Foster said, "The hope is that they will have a new president after the first quarter." If Mitt Romney wins in November and insists on canceling Obamacare in January, by the end of the continuing resolution in March, "there will not have been much of a giveaway."
Tax issues remain unresolved. One is that the payroll-tax cut in place the past two years expires Dec. 31, hiking that tax to 6.2 percent from 4.2 percent. "There's a conspiracy of silence on the payroll-tax cut," Foster said. "Both Republicans and Democrats in Congress, as well as the president, prefer not to talk about it."
Other taxes are set to increase Jan. 1, including the expiration of Bush-era income tax and capital-gains tax cuts. The House, controlled by the Republicans, already passed an extension. But the Senate, controlled by Democrats, wants to continue the tax cuts only for those making less than $250,000 a year. This appeal to envy would disproportionately hurt people living in areas with high expenses, such as California.
Also hit hard would be thousands of small businesses classified as S corporations, which pay business taxes at the individual tax rate. Such a business might provide, for example, $70,000 in salary to the owner, but $220,000 — or what's left of it after taxes — for business expansion and job creation.
"When they come back from the August recess, Democratic senators will see that the economy is doing worse and will join with Republicans in agreeing to extend the tax cuts," Foster predicted. Maybe common sense will prevail for once.
Several Obamacare tax increases also will hit in 2013, he said, but will be difficult to repeal without a change of administrations. For example, there's 2.3 percent excise tax on the sale of medical devices — hearing aids, pacemakers, etc. "It's hard to see how Congress could force the president's hand," Foster said. That's where the voters come in, on Nov. 6.