updated 7/12/2010 10:12:00 AM ET 2010-07-12T14:12:00

Keeping unemployment benefits flowing for millions of workers whose jobs were eaten by the recession should have been a slam dunk in an election year.

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But until this month, Senate Democrats have been unable to bring themselves to pass a simple bill that just does it. Instead they've demanded a series of unrelated and often controversial tax and spending add-ons that have enabled Republicans to mount successful filibusters.

Now that the legislation has been shorn of all the extras, the bill could win final passage soon. It can't come soon enough for more than 2 million people whose checks have been cut off in a five-month impasse in which there's plenty of blame to go around:

— Democrats and their leaders made several decisions that in retrospect look like miscalculations, like pulling the rug out from under a bipartisan measure launched back in February and loading a subsequent bill with $24 billion for governors — guaranteeing that most Republicans would vote against it.

— Republican moderates voted one way in March to help the bill pass but changed their minds just weeks later, having gotten religion from GOP leaders and tea partiers on the budget deficit.

Health care sideswipe
Little remembered amid the ongoing partisanship and recrimination is that jobless benefits also got sideswiped by President Barack Obama's health care overhaul.

To reduce the health care bill's impact on the deficit, Democrats decided to close almost $30 billion in tax loopholes. Until the final health care push, those revenues had been designated to cover the cost of extending other popular family and business tax breaks as part of a broad bipartisan jobless benefits package.

Besides the jobless aid, the measure contained a payroll tax holiday for businesses, tax breaks for business, health insurance subsidies and help for doctors facing a cut in their Medicaid payments. It had support from across the political spectrum, from Obama to conservative Senate Republicans.

Some liberals, however, balked at the deal, which was cut principally by Senate Finance Committee Chairman Max Baucus, D-Mont., and the committee's senior Republican, Sen. Charles Grassley of Iowa. The liberals didn't like that their "jobs agenda" seemed hijacked by business lobbyists, who won items like research and development tax credits and some arcane measures such as tax breaks for NASCAR tracks. With unemployment hovering just under 10 percent, they also thought it was too light on subsidies for preserving and creating jobs.

So Senate Majority Leader Harry Reid blew up the agreement, instead advancing a pared-back jobs bill excusing businesses from having to pay the employer share of Social Security taxes this year on any new workers they hire. Economists were dubious it would produce many jobs. Meanwhile, unemployment aid would wait for later legislation.

"We could have had this bill passed in three days and ... Reid decided to scuttle it," Grassley complained. "Baucus read about it in the paper."

Short-term extension
The delays meant that Congress had to pass a short-term extension of jobless benefits at the end of February. Reid and Senate Minority Leader Mitch McConnell, R-Ky., worked out a deal for a quick vote to avoid an interruption in benefits.

But another Kentucky Republican, Sen. Jim Bunning, single-handedly held up the bill for days, demanding that government spending elsewhere be cut to pay for the jobless benefits rather than add to the federal debt. Bunning folded on March 2. But his fight resonated with tea partiers and millions of other voters worried about year after year of trillion-dollar deficits.

In the meantime, Reid resurrected the longer-term jobless aid package. He mixed in familiar elements like extending expired tax breaks and added a $24 billion package of aid to cash-starved state governments so they could avoid layoffs of tens of thousands of public employees — a key part of last year's economic stimulus bill.

The result was a bill adding almost $100 billion to the deficit. That meant that GOP support would be limited. But it still passed in March with support from several Republicans, including key moderate Sens. Olympia Snowe and Susan Collins of Maine and George Voinovich of Ohio.

That was the bill's high point. The political sands soon began to shift.

Another short-term unemployment insurance extension — needed to buy time for negotiations on the bigger bill — came at the end of March. It would be the last. Beginning in June, hundreds of thousands of workers unemployed for more than six months started losing the weekly checks.

More Republicans picked up on Bunning's position and demanded cuts in other programs, including Obama's $862 billion stimulus bill passed a year earlier, to pay for the extension.

Unemployment rate
It was a message the party felt increasingly comfortable with after losing the health care fight, especially as the European debt crisis roiled the markets and the U.S. government's debt topped $13 trillion. Republicans stressed that with the unemployment rate still near double digits, jobless benefits averaging $300 a week should be extended — but that they should be paid for.

"You never know in politics when that magic moment comes when things really begin to change, but I believe that it has occurred now," GOP Whip Jon Kyl of Arizona told reporters March 26. "I think you'll see a much greater commitment now to fiscal responsibility."

The short-term jobless aid extension passed, but it took until late May for their House and Senate negotiators to agree on a longer-term jobless aid package featuring new business tax increases but still racking up $115 billion in new government debt over the next decade.

This time, conservative House Democrats recoiled. House leaders were forced to sharply pare the measure back, eliminating new aid for state governments as well as a longer-term fix for doctors threatened with a 21 percent cut in Medicare payments.

The House passed the bill on May 28, returning the measure to the Senate, where debate consumed the Senate's entire June schedule. Democrats still wanted to help governors with their payrolls but ultimately acceded to cutting it by one-third and paying for it partly with cuts from last year's stimulus bill. Even that measure failed just before Congress recessed for the July 4 holiday.

Reid is now resigned to a stand-alone six-month extension of unemployment benefits at a cost of $33 billion. Aides say he will try to pass it when West Virginia Gov. Joe Manchin names a successor to fill the seat of Democratic Sen. Robert C. Byrd, who died two weeks ago. Those who lost benefits will get them retroactively.

Democrats also maintain hopes of passing a $16 billion aid package for governors aimed at preserving the jobs of tens of thousands of state workers through the election. They intend to pay for it in part by cutting food stamp benefits.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Will Wall Street gains translate to jobs?

  1. Closed captioning of: Will Wall Street gains translate to jobs?

    >> economy. all signs point to a big week on wall street with corporations set to announce second quarter earnings, but what does it mean for you? we have jim cramer , who is the host of " mad money " joins us. good morning. usually when you're here, you come bearing bad news. today you're all smiles. why is wall street so happy?

    >> one of the things that's occurred is we're at ernlgs season, and i think it's going to be a good season. the companies have too much cash. very strange position to be in. they hire or give it back to shareholders.

    >> we have a first indication of that last week. the stock market jumped 450 points which is?

    >> 5%, which is a gigantic move. typically that means people are too negative. i've been saying it's just not a jobs recovery. i think that's going to change in the second half. we're starting to see hiring for the first time on wall street . very important.

    >> so that point, though, that wall street is beginning to hire, even though we're not seeing overwhelming hiring in the rest of the sectors, what does that mean? is that an indicator?

    >> it's a fantastic indicator. they tend to be ahead. they start hiring because companies need more money. they only need more money when they want to expand rather than contract. i've always found when wall street is hiring, more hiring follows. it's a very important predictor.

    >> i'll put your feet to the fire. where do the first jobs come at wall street , what sector?

    >> i think the automobile industry is hotter than anybody realizes. the numbers for june are extraordinary. i think things are improving in the country.

    >> how soon might they begin?

    >> it will be something they have to do by september. i think people are sproized the inventories are low. we see material that is go into car starting to go up in price. the railroad car loadings are the best in years. this stuff cannot be ignored.

    >> you're being very optimistic here. what about the talk about the double dip ? what do you think?

    >> i think you can take that off the table. i think we're not going to have a strong economy, but the rest of the world is on fire. south korea , mexico, latin america , india, china, even germany and france, these are more important countries than we think. they can pull our economy up.

    >> if wall street got us into the mess, is it the world leading us out or wall street ?

    >> it's the world. i don't want to be as optimistic about our economy. we haven't created jobs yet. the census jobs end, so it won't seem so rosy. when industrial america starts to hire, it's hard to stay negative.

    >> you say the recovery is like this. it's going up bushg, but it's going down a little bit.

    >> a lot of the worry was about that europe was about to fall apart. i think that's not going to happen. the systemic worry the whole world is blowing up, that is off the table, ann, and that's very positive.

    >> what about this other view, for the full recovery to happen will take a long time? will you agree with this idea? some jobs won't come back or take years to come back?

    >> i think that's very true. we don't have enough money as a government to continue to spend money without raising taxes . raising taxes would send us into a double dip . we're getting clues the administration doesn't want to do that. the administration is declaring a truce against business. of course, they never thought they were at war.

    >> jim cramer , that's the last word. we're out of time. we get a lot when we talk to you. you can catch " mad money " weeknights at 6:00 and 11:00 eastern


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