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Deficit Fear-Mongering Gets Results in US Senate as Unemployed Pay the Price

Senate Democrats Dismantling Aid Package Due to Deficit

by Lori Montgomery

President Obama's urgent plea for more spending on the economy ran into the political buzz saw of the Senate on Tuesday, where Democratic leaders began chopping apart an aid package for unemployed workers and state governments in an effort to lessen its impact on the deficit.

Peter Orszag, currently the White House Director of the Office of Management and Budget, frames a graph showing budget projections. Although many economists, including Paul Krugman, have decried the 'deficit fear-mongering' perpetrated by the GOP, it seems that the fears are winning out over a more progressive and thoughtful fiscal policy. (Photo credit: By Chip Somodevilla/Getty Images) The slimmed-down measure was still evolving late Tuesday. But Senate Majority Leader Harry M. Reid (Nev.) was trying to salvage one of Obama's top priorities -- $24 billion to avert the layoffs of state workers -- by scaling back other pieces of the sprawling package, including a provision to postpone a scheduled pay cut for doctors who see Medicare patients. Instead of postponing the cut until 2012, Reid is considering protecting doctors only through the rest of this year.

Reid also took aim at jobless benefits, which some Democrats complained may be too generous in a time of economic recovery. While the revised package would extend emergency benefits through the end of November, aides said it also would take $25 out of the weekly checks received by 15 million unemployed workers, repealing a payment boost first approved in last year's economic stimulus package.

Those changes were aimed at slicing billions of dollars from the overall cost of the package and attracting the support of moderates in both parties who objected to the original price tag. According to the nonpartisan Congressional Budget Office, the original measure would have increased deficits by $80 billion over the next decade.

It was unclear Tuesday whether the leaner package would win the 60 votes needed to avert a Republican filibuster and push the measure to passage. Senate leaders planned to stage a vote Wednesday that would permit senators to go on record in opposition to the larger package, but senior Democratic aides said the ultimate fate of the legislation remained uncertain.

"It's going to be manipulated and worked over and dealt with," said Sen. Jon Tester (D-Mont.), who came up with the idea to trim unemployment checks. "But as it goes forward," he said, "we've got to look for ways to save money."

Advocates for the unemployed bemoaned the proposed cut in benefits, saying $25 is a big bite from checks that average $309 a month.

"It's shocking what their priorities are," said Maurice Emsellem, policy co-director at the nonprofit National Employment Law Project, noting that there are no apparent efforts to similarly scale back provisions that would extend expired tax breaks for businesses and individuals, adding $32 billion to the package. "Unemployment is still close to 10 percent, and there's no indication that it's coming down anytime soon."

If approved, the package would represent a significant down payment on Obama's request for additional federal cash to bolster a still-fragile economic recovery. On Saturday, the president sent a letter to congressional leaders pleading for more spending to avert "massive layoffs" at the state and local level, even as policymakers begin planning to reduce deficits that have soared to their highest levels since World War II when compared with the size of the economy.

Democratic leaders agree with those goals. But with midterm elections approaching and public anxiety about deficits rising, many rank-and-file Democrats are increasingly unwilling to support additional deficit spending.

On Tuesday, the House approved another piece of Obama's job-creation agenda, voting 247-170 to approve a small package of tax cuts for small businesses that would not increase the deficit.

Other concerns were hanging up the Senate jobs bill Tuesday. Several moderate senators are dissatisfied with a plan to increase taxes on hedge fund managers and other partnerships whose profits are taxed at the lower capital gains rate, rather than as regular income. Sen. Olympia Snowe (Maine.), one of several Republicans whose support is being sought for the package, said she remains concerned that the measure also would increase taxes on certain small businesses.

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