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Tax breaks at risk if supercommittee fails

WASHINGTON

If the deficit-cutting supercommittee fails, Congress will face a crummy choice. Lawmakers can allow payroll tax cuts and jobless aid for millions to expire or they can extend them and increase the nation's $15 trillion debt by at least $160 billion.

President Barack Obama and Democrats on the deficit panel want to use the committee's proposal to carry their jobs agenda. That includes cutting in half the 6.2 percent Social Security payroll tax and extending jobless benefits for people who have been unemployed for more than six months.

Also caught up in what promises to be a chaotic legislative dash for the exits next month is the need to pass legislation to prevent an almost 30 percent cut in Medicare payments to doctors. Several popular business tax breaks and relief from the alternative minimum tax also expire at year's end.

A debt plan from the supercommittee, it was hoped, would have served as a sturdy, filibuster-proof vehicle to tow all of these expiring provisions into law.

Both sides of the deadlocked committee held separate talks Saturday, but formal negotiations remained stalled, reaffirming gloomy predictions that the deficit-fighting panel may fail.

With a midnight Wednesday deadline fast approaching, the panel's six Republican and six Democratic members were still far apart on how to achieve their goal of finding at least $1.2 trillion in budget savings over the next 10 years.

The Republican members held a conference call among themselves yesterday morning, but details about what was said were not immediately available, aides said.

Having rejected the latest Republican offer, the six Democrats were holding private conversations this weekend, with no group meetings planned, aides said.

Instead of cutting the deficit with a tough, bipartisan budget deal, Congress could pivot to spending enormous sums on expiring big-ticket policies.

If lawmakers rebel against the cost, as is possible, they would bear responsibility for allowing policies such as the payroll tax cut, enacted a year ago to help prop up the economy, to lapse.

Last year's extensions of jobless benefits and the first cut in the payroll tax were accomplished with borrowed money.

The 2 percentage point payroll tax cut expiring in December gave 121 million families a tax cut averaging $934 this year, at a total cost of about $120 billion, according to the Tax Policy Center.

Obama wants to reduce the payroll tax by another percentage point for workers at a total cost of $179 billion and cut the employer share of the tax in half for most companies, which carries a $69 billion price tag.

Letting extended jobless assistance expire would mean that more than 6 million people would lose benefits averaging $296 a week next year, with 1.8 million cut off within a month.

Economists say those jobless benefits -- up to 99 weeks in high unemployment states -- are among the most effective way to stimulate the economy because unemployed people generally spend the money right away.

Extending benefits to the long-term unemployed would cost almost $50 billion under Obama's plan. Preventing the Medicare payment cuts to doctors for an additional 18 months to two years would in all likelihood cost $26 billion to $32 billion more.


The clock is ticking

The goal

$1.2 trillion in budget savings over 10 years


The deadline

Wednesday, midnight


If deadline is missed

Steep automatic spending cuts kick in, unless Congress stops them

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