The House will get to work on the tax reconciliation bill when they return to D.C. the week of December 5. Vast differences between the House and Senate versions of the tax bill already threaten to impede conference negotiators, and in what promises to further complicate the situation, House GOP members appear to be split over providing excessive tax breaks to businesses in the Gulf Coast.

In their tax bill, the Senate approved $7 billion worth of tax breaks for businesses that invest in the Gulf Coast region. These breaks will go to a number of businesses whose ventures include casinos, massage parlors, liquor stores and golf courses — industries that typically have been excluded from preferential federal tax treatment. This has some conservative members in the House angry, and with the backing of anti-gambling religious conservatives, Rep. Frank Wolf (R-VA) is leading the fight to deny breaks to businesses that he views as less deserving of federal assistance. He is ciculating a "Dear Colleague" letter that will ultimately be delivered to Speaker Dennis Hastert (R-IL).

Posted by Becky Lewis, 03:55:14 PM



Priority Check: Congressman Donates Pay Raise

Rep. Jim Matheson (D-UT) is giving away the annual pay raise he received to charity today. The Transportation/Treasury/HUD appropriations bill raised Congress' pay by $3,100 this year.

A number of Representatives, including Matheson, are making a point of giving away their pay raise to charity, to demonstrate that their priorities lie with investing in America as opposed to continually increasing their own pay during a time when Congress is straining to cut down spending on programs. (Note: Matheson's salary has increased by $24,000 since he took office in 2001). “If there was ever a time for shared sacrifice, this is it,” said Matheson in a statement. “I know eliminating the pay raise doesn’t mean much in terms of dollars, but it is the right thing to do.”

The Bureau of Economic Analysis reported that the economy grew 4.3 percent in the third quarter, which is the best showing in more than a year. The growth marks a sizable increase from the 3.3 percent increase in GDP registered in the second quarter of this year. Corporate profits decreased $45.5 billion this quarter, following a $59.3 billion increase in the previous quarter. According to the BEA, "The major contributors to the increase in real GDP in the third quarter were personal consumption expenditures (PCE), equipment and software, federal government spending, and residential fixed investment."

This growth was unexpected and did not reflect the drag many were predicting would occur in the aftermath of the Hurricanes. Economic analysts had been estimating that economic growth would slow 1 - 1.5% over the next year.

Associated Press: Economy Grows At Robust Pace Despite Storms (11.30.05)

As of late, American voters seem more concerned with having revenue to invest in national priorities than in giving it away in the form of costly and regressive tax cuts. In recent elections, voters in California, Colorado, and Washington state rejected ballot measures that would have rolled back tax increases or limited state spending. Many believe that after September 11 and the Gulf Coast hurricanes, more Americans are starting to see the value of a strong government infrastructure which can adequately respond to public needs by providing safety and various other services.

In the same vein, it is growing increasingly clear to many that the irresponsible and expensive tax cuts of 2001 and 2003 are not boosting economic performance, nor are they paying off well. As Allan Sloan mentions in a column in today's Washington Post, "Bush and the rest of the it's-always-a-good-day-to-cut-taxes crew are having trouble getting Congress to approve $70 billion of tax cuts (over five years) as part of the budget reconciliation process. These cuts would go primarily to upper-middle-income and rich taxpayers, while $35 billion of proposed cuts in benefits for food stamps, Medicaid and the like would affect mostly lower-income people. Some members of the House and Senate now seem to have realized how distasteful this combination is. As well they should."

As Sloan goes on to mention, "Fallout from phony numbers [used to justify the tax cuts] and having to pay for Hurricane Katrina have stalled Washington's cut-taxes-and-borrow crew, at least temporarily." This is especially apparent on capital hill, where a number of Republicans are stepping in and saying "enough is enough." George Voinovich (R-OH) has already made it clear he is opposed to the $70 billion in tax cuts Congress is trying to pass in reconciliation, Olympia Snowe (R-ME) is opposed to the extension of capital gains and dividends extensions and is currently responsible for the gridlock in the Finance Committe, and a handful of House members such as Sherwood Boehlert have spoken out against excessive spending cuts.

According to the latest report from the Bureau of Labor Statistics (BLS), the nation added a minute 56,000 new jobs in October, a large reduction compared to previous month's growth. Unlike the September report, BLS concluded that the weak job growth was "not attributable to the areas directly affected by Katrina" because job growth was down in all areas of the country.

The most disturbing aspect of the report was a preliminary estimate of the employment status of victims of Hurricane Katrina. Shortly after the hurricane struck, BLS - along with analysts at the U.S. Census created a short series of questions designed to identify and solicit information from survey respondents who had evacuated from their homes. Based on these questions, BLS estimated nearly a quarter (24.7 percent) of the Americans impacted by the hurricanes were currently unemployed. What's worse is this survey was not able to reach those still living in temporary facilities, shelters, or hotels, the vast majority of whom are most likely struggling to find steady employment. The 24.7 percent unemployment figure, therefore, is most likely too low.

Economic Policy Institute Senior Economist Jared Bernstein believes these new data call for congressional action:

These findings strongly suggest a necessary policy intervention that would significantly boost the job prospects of those evacuees who want to return home. Given that many of those who left the affected areas have low incomes and little savings, they need to get back to work as soon as possible. Congress therefore should quickly craft and implement policies to help these displaced persons find transportation, housing, and work.

BLS plans to continue to use these special Katrina-related questions through January 2006 to track trends in the employment status of Katrina vicitms.