Congress Talks Unemployment Extensions and Hiring Tax Credit

As early as tomorrow, the Senate is expected to begin debating a measure that would provide an extension of unemployment benefits to all states. The House recently passed an extension, but it provided for aid only to the jobless in states with high unemployment rates. The Senate bill was introduced by Sen. Max Baucus of Montana, where the unemployment rate is just 6.6 percent, compared to 9.8 percent nationwide. If Montana looks good, however—with just a little over 33,000 unemployed workers in September—keep in mind that the number of unemployed has jumped by 75 percent since the start of the recession.

[See one piece of good news about jobs.]

Baucus would pay for the benefits extension with a tax extension—pushing the federal unemployment tax through the end of 2011. While many Republicans would likely be resistant to a tax extension, no one in Congress would argue with the need to prevent a greater threat to the economy—that of 1.5 million Americans exhausting their benefits by the end of the year, as the National Employment Law Project estimates. Former Fed Chairman Alan Greenspan has even come out in support of the benefit extension.

There may also be bipartisan support for giving a tax credit to employers who make new hires. The NYT reported House Minority Whip Rep. Eric Cantor said there was "a lot of traction for this kind of idea," and that Congress would welcome White House efforts in that regard. However, Cantor's office today told The Hill that his statement was mischaracterized. Cantor was instead speaking generally about small-business job creation, not the specific tax credit which is "'inefficient and cumbersome," a spokesman says.

[See why the September jobs report was so brutal.]

One issue with a hiring tax credit, last used in the 1970s, is fraud. Back in January, the Wall Street Journal reported the same proposal had little support from Congress:

During the campaign in October, Mr. Obama had proposed a tax credit of $3,000 for each new hire made by businesses, in response to mounting job losses. Transition aides were determined to keep that promise in his economic-recovery package, but the proposal has come under strong criticism on Capitol Hill, with many members of Mr. Obama's own party raising concerns about its effectiveness.

Economists of all political stripes have said businesses would likely claim the credit for hires they would have made anyway, or worse, lay off workers simply to rehire them and claim the tax break. "That's one that gets a lot of opposition," said Sen. Charles Schumer, a New York Democrat.