How Congress Is Poised To Screw Over Average Americans In The Next 24 Hours

It's apparent that the current Congress has no interest in addressing some issues for the common folks before their "vacation".


According to the official House calendar on Majority Leader Eric Cantor’s (R-VA) website, Congress will go into recess for the rest of the year on Friday. Some members could head home as soon as the newly minted budget deal passes. From immigration reform to tax code overhauls, lawmakers are leaving plenty of unfinished business behind them.

But obscured by the big-picture failures are three specific legislative items with deadlines tied to the end of the year. If Congress goes home without taking two simple steps to extend programs, or if it agrees to a bad compromise on a third piece of legislation, millions of middle-class and lower-income Americans will face unnecessary economic hardship. Here are three ways that Congress appears prepared to inflict severe and unnecessary pain:

1. Millions of job seekers who have been out of work for more than six months will lose their safety net. States handle unemployment insurance benefits for the first six months of a laid off worker’s job hunt. Then the federal government steps in to provide Emergency Unemployment Compensation (EUC) while the job search continues. That relief keeps people who want to work but haven’t yet found a job from sliding into poverty. But the law authorizing EUC expires at the end of the year. Without an extension, 1.3 million people will lose their EUC instantly. Another 850,000 workers will have exhausted their state-level unemployment insurance benefits within the first three months of next year and find themselves without support.

The damage doesn’t stop with those 2.1 million people who would be harmed if Congress fails to extend EUC. By reducing those peoples’ ability to spend money, Congress would also be undermining consumer demand and weakening the economy. White House economists estimate that if EUC expires, the resulting drop in consumer spending will lead to 240,000 further layoffs.

There is no EUC extension in the budget deal revealed earlier this week, and congressional leaders have suggested that the program will die this year.

2. Mortgage relief will change from a benefit to a burden. When a homeowner renegotiates her mortgage on more favorable terms, the amount she saves under the new loan counts as income for tax purposes. But the severe recession and ongoing foreclosure crisis led Congress to give borrowers a break from that tax rule starting in 2007 by passing the Mortgage Debt Forgiveness Relief Act (MDFRA). Mortgage relief has been a common feature in the legal settlements the government has struck with banks that over misdeeds in the housing market, and the MDFRA meant that those mortgage write-downs didn’t end up hurting borrowers. But the MDFRA came with an expiration date of January 1, 2012. Congress extended the law for a year last January because the foreclosure crisis remains severe, but that means it is once again poised to expire at year’s end.

As an example, if a borrower who makes $40,000 in annual income got a $100,000 principal write-down on his mortgage, his tax bill would suddenly swallow three-quarters of his earnings for the year without the MDFRA. What is meant to bring financial relief will instead cause vulnerable homeowners’ tax liability to skyrocket.

Multiple bills to extend the MDFRA have been introduced, including one effort headed by Sen. Debbie Stabenow (D-MI), but time is running short.

3. Nearly 2 million hungry people could be forced to get by on even less. Lawmakers are worried that they won’t be able to reach a deal on the farm bill before the recess, according to a report in the New York Times on Thursday.

But for hungry Americans who rely on food stamps, no deal is a good deal. That’s because the likeliest farm bill agreement that Republicans and Democrats might be able to strike would result in serious benefit reductions for 1.7 million people in 17 states. Compared with the cuts Republicans have demanded, that deal looks pretty good.

But outside of that political context, the reality of America’s hunger crisis and stubbornly high unemployment rate mean that benefit cuts don’t make much sense. Plus the program is already shrinking organically in both cost and enrollment terms, and it just absorbed a big cut that means it now provides less than $1.40 per meal to the typical recipient.

By Alan Pyke

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