President Barack Obama has decided to play hard ball with the Republican controlled House of Representatives threatening to veto any of their tax credit legislation if they do not pass the Senate's unemployment benefits extension bill. The House wants to extend the Research and Experimentation Credit ("R&D credit") known as H.R. 4438 - American Research and Competitiveness Act of 2014 and sponsored by Rep. Kevin Brady, R-TX, which according to Roll Call is a permanent research and development tax credit that would cost $156 billion. The major problem the White House has with this bill is the cost would not be offset by "closing any tax loopholes," and the entire price of the bill will be added to the deficit. Obama and the White House issued a "Statement of Administration Policy" on the tax credit on Tuesday, May 6, 2014 indicating they are upset with the high cost being added to the deficit when the House instead could have passed the unemployment benefits extension.
If the R&D credit's cost would have been offset President Obama could have supported the bill because it "helps create high-skilled jobs, as well as encouraging new innovations and future productivity." By permanently extending the credits and it creates a precedent that all outstanding tax credits can be permanently extended adding $500 billion to the deficit. The White House however, finds that Republican controlled House is acting hypocritical since they just "passed a budget resolution that required offsetting any tax extenders that were made permanent with other revenue measures." The GOP always complains the reason they do not want pass the administration's legislative priorities is because they claim Obama and the Democrats are adding to the deficit
The White House claims that the reason for any potential veto is largely based on the credit extender adding to the deficit, especially with the unemployment benefits extension being "ignored." The statement argues that "The deficit increase in H.R. 4438 is more than fifteen times the cost of the proposed extension of emergency unemployment benefits, which Republicans are insisting be offset." The White House pointed out that the unemployment benefits extension costs so much less and is entirely being paid for, yet the House will not pass it. Nearly 3 million long-term jobless have been left without any benefits since Dec. 28, 2013 when Congress let the Emergency Unemployment Compensation (EUC) program expire.
Another reason President Obama and the White House is upset is the House GOP's preference to make big business a priority when the lower income and middle class need the help. The White House indicated; "House Republicans also are making clear their priorities by rushing to make business tax cuts permanent without offsets even as the House Republican budget resolution calls for raising taxes on 25 million working families and students by letting important improvements to the Earned Income Tax Credit, Child Tax Credit, and education tax credits expire."
President Obama and the Democrats have been focusing their legislative priorities on the Economic Opportunity program geared at helping low income and the middle class. This midterm election year the Democrats have been trying to distinguish themselves from the Republicans as the caring party concerned for the middle class as opposed to the Republicans who the Democrats are trying to portray as the party of the wealthy and big business. The GOP is playing into this characterization by being willing to pass and extend business tax credits no matter what.
The White House concluded their statement with a strong warning about the R&D credit; "The Administration wants to work with Congress to make progress on measures that strengthen the economy and help middle-class families, including pro-growth business tax reform. However, making traditional tax extenders permanent without offsets represents the wrong approach." The White House was alluding to proposal by House Minority Whip Steny H. Hoyer, D-Md, which Obama does approve of.
Last week, on Thursday May 1, Rep. Hoyer took the GOP to task for wanting to extend R&D credit, by adding to the deficit and as the president did, chastising them for looking to pass that bill while refusing to pass the unemployment benefits extension bill. "We are going to make a decision, apparently, not to pay for something that we know is going to increase the deficit. So the analogy when we want things paid for is not always followed. For instance, unemployment insurance, almost invariably not paid for. … We have a bipartisan, paid-for unemployment insurance bill that the Senate passed … that we can't get to the floor. It's paid for and helps 2.5 million people who are falling through the cracks. Yet we bring a bill to the floor that has a $155 billion cost, don't pay for it and the unemployed 2.5 million are ignored."
Hoyer proposed that if the House passes a comprehensive immigration reform bill, it would save $175 billion and would pay entirely for the business tax credit. Hoyer explained "The reason we're considering this bill next week is because it's easy to do. The reason we're not considering comprehensive immigration reform is because it's difficult to do, but comprehensive immigration reform would pay for all of the tax cuts that are being proposed in these six extenders and indeed in the extenders proposed by the Senate Finance Committee." Hoyer used Speaker of the House's John Boehner's own comments against him. Boehner made fun that the reason his fellow congressman are not taking up immigration reform is because they find it to difficult a task when he delivered remarks at a luncheon held at Brown's Run County Club in Madison Township in Ohio on Thursday, April 24, 2014.
House Majority Leader Eric Cantor, R-VA responded to the criticism regarding the R&D credit saying that the GOP believes that the tax extender would "stimulate" the economy and create jobs. Cantor also argued back that tax credit was never an issue and it has been renewed by both Democrats and Republicans through the years. Cantor commented; "We've essentially been allowing an R&D tax credit since 1981 in this country, so let's call it what it is and make it permanent so that we can get back on the path to growth. Addressing growth, addressing our unfunded liabilities connected with entitlement programs, that's the sure way to reduce deficits and reduce the debt burden."
Cantor tried to bring back the argument and focus on the president being the problem and real reason the Republicans in the House will not take up immigration reform that it is a trust issue with the president. Cantor pointed out that President Obama's approach and unwillingness to compromise is the obstacle; "I've said to the president that what could help is we start rebuilding that trust, which starts with an admission that it can't be can't be my way or the highway…the president says, 'No we can't do something like that. They can't, we can't do something like that without taking care of everything.'"
Since House Speaker Boehner refused to negotiate with the Senate after Senate Majority Leader Harry Reid, D-NV and the White House refused Boehner request for adding job creation measures on Tuesday, April 29 President Obama has resumed taking a more vocal and active role in the unemployment benefits extension debate.
The Senate finally reached a bipartisan compromise on EUC extension, and passed their bill a month ago on April 7, 2014. There is very little time left for the House of Representatives to pass the unemployment benefits extension as the Senate bill expires in the end of May. Should it expire the bill's authors Senators Dean Heller, R-NV and Jack Reed, D-RI have promised to go back and start the process over and write another bill.
At this point Speaker of the House John Boehner, R-OH refuses to put the bill, because it does not include job creation measures. The speaker has been pushing for the White House to provide him a list of acceptable provisions to be added to the bill. Neither Obama nor Senate Majority Leader Harry, Reid, D-NV want any provisions added to the bill, preferring it passed as is.
Meanwhile House Republicans have expressed interest in passing the bill, but with a catch most of them want to add Republican favored provisions. Among the provisions being considered are a business tax provision and passing the XL Keystone Pipeline along with modifying two elements of the health care law. The most popular provision is adding a job training programs restructure bill.
The unemployment benefits extension bill is left stuck in a standstill between Republicans who want provisions and the Democrats who refuse to let any be added. Partisan battles leave three million Americans abandoned and caught in the midterm elections squabbles. Meanwhile since the EUC program expired on Dec. 28, 2013 nearly 3 million Americans lost access to benefits, and each week about 70,000 Americans keep losing benefits. It is projected that by the end of the year 1.6 million more Americans will lose benefits.
The new April jobs report released on May 2, 2014 makes it even more complicated to convince reluctant Republicans to pass the unemployment benefits extension. The economy added 288,000 jobs, while the unemployment rate plummeted from 6.7 percent down to 6.3 percent, the lowest since just before the economic crisis in September 2008. According to USA Today the long-term unemployment rate also fell, with 287,000 less Americans unemployed for longer than six months. Now the total stands at 3.5 million Americans or 35.5 percent all unemployed Americans. If the House does not move on the unemployment extension bill until the end of the month, the Senate is going to have to start all over again and the chances of the EUC program being extended diminishes leaving three million Americans with the help they need to survive until they finally find a job.
- STATEMENT OF ADMINISTRATION POLICY, H.R. 4438 – American Research and Competitiveness Act of 2014, (Rep. Brady, R-Texas, and 23 cosponsors), Executive Office of the President, Office of Management and Budget, May 6, 2014
Bonnie K. Goodman is the Editor of the Academic Buzz Network, a series of political, academic & education blogs which includes History Musings: History, News & Politics. She has a BA in History & Art History & a Masters in Library and Information Studies, both from McGill University, and has done graduate work in Jewish history at Concordia University as part of the MA in Judaic Studies program. Her specializations are US, Canadian & Israeli politics.