The federal government is on course for large spending cuts and tax increases starting January of 2013. This comes from a combination of three things: the end of some of the Obama administration stimulus that began in 2009; the end of large tax cuts, especially for the wealthy, done under the Bush administration; and automatic spending cuts designed to reduce the federal budget deficit. While some of the tax increases would not fully take effect until April 2014, and others could be reversed, the right wing is using fears of a ‘fiscal cliff’ to try to extend tax cuts for the rich and block planned cutbacks in military spending.

The largest immediate impact will be felt by jobless workers, as the federal Emergency Unemployment Compensation (EUC) program will close down in January unless Congress extends funding. The EUC provides an additional year of Unemployment Insurance (UI) benefits after the state UI is used up at the end of six months. There are now about 2.5 million unemployed people collecting EUC who will lose their benefits if Congress doesn’t act. The other federal UI program, Extended Benefits (EB), has already been shut down in a compromise with the Republicans, dropping 500,000 jobless workers from Unemployment Insurance.

The other group facing an immediate impact is low and middle-income workers, who will see their Social Security payroll tax rate rise from 4.2% to 6.2% when the 2% tax cut ends in January. This tax cut began with the American Recovery and Reinvestment Act (ARRA) (the Obama administration stimulus program that started in February 2009). There will be an immediate increase in the FICA withholding from workers’ paychecks in January 2013, reducing workers’ take home pay by 2%. FICA is the payroll tax that pays for Social Security and Medicare.

The impact of the end of the Bush-era tax cuts will take a longer period of time. The end of income tax cuts will depend on when the IRS issues new withholding rules. The higher taxes would be refunded in 2013 when people file their income taxes if some or all of the tax cuts are extended. In contrast, there is no mechanism and almost no chance that unemployed workers or low and middle-income workers will see any retroactive benefits or refunded payroll taxes if these programs are extended after the beginning of the year.

The end of other Bush tax cuts for stock dividends and reductions in the estate tax would be felt later since these taxes are not withheld. The Alternative Minimum Tax (AMT) would also cover more high-income (but not rich) households earning $200,000 to $500,000 per year, but this would not kick in until they file their 2013 tax returns in 2014. In fact, the AMT has been regularly cut back mid-year in previous years.

In addition to these planned tax increases, the failure of Congress to come up with spending cuts means that automatic cuts will start in 2013; half coming from the military, and the other half coming from other spending (except for Social Security, Medicare, and Medicaid). Cuts in domestic spending such as education and food stamps will be felt faster, while the military cuts will take longer.

The media and the right-wing have been calling these tax increases and budget cuts a ‘fiscal cliff’ to scare people into supporting extension of tax cuts for the rich and restoring spending on the military. While it is true that if all the spending cuts and tax increases continue for a number of months that the economy will fall back into a recession, there is no ‘cliff’ that the economy will fall off in January.

The only cliff will be for the millions of unemployed collecting federal Extended Unemployment Insurance benefits who will be cut off unless the EUC program is renewed. For working people and their allies, this is the most immediate fight: to renew and expand federal Unemployment Insurance benefits. There are more than 5 million people who have been out of work for more than six months, making up more than 40% of all unemployed workers. Half of these jobless workers are not collecting unemployment insurance benefits already. This group would be the hardest hit but is getting the least attention by the mainstream media.

Another fight for us to wage is to renew the payroll tax cut that mainly goes to low and middle income workers. Even better would be to return to the original Obama stimulus tax cut, which would also benefit the teachers and some other government workers who are not covered by Social Security and the self-employed who also pay Social Security taxes but not FICA.

An additional battle we have is the effort to extend the tax cuts for low and middle-income households, while letting the Bush tax cuts expire for higher incomes, dividends and the estate tax. Over the last 30 years, the rich have gotten richer and the poor poorer and more and more workers are just surviving paycheck to paycheck. The rich can afford to pay and should pay more.

Finally, we have to join the effort to stop spending cuts on domestic programs, such as education and food stamps, but to make even greater cuts in military spending. This effort will face stiff opposition from Republicans and some Democrats, who want the opposite: more military spending while cutting food stamps (which the Republicans in Congress recently voted to do).

While the Obama administration is ‘talking the talk’ on many of these points, we cannot rely on a Democratic victory in November to win these goals. Just look at what Obama promised working people in 2008: expanding voting rights for workers trying to unionize, immigration reform and universal health care. Card Check to unionize? Didn’t even try. Immigration reform? No legislation drafted, and in 2012 Obama gives temporary status to undocumented who came as children. He could have done this in 2009, but instead deported record numbers of immigrants. Universal health care? Obama’s reform will subsidize private insurers and expand Medicaid (which pays so little that many doctors won’t accept it) and still leaves millions without health insurance.

We need to continue to build a grassroots movement to fight against putting the burden of austerity on poor and working people for 2012 and beyond.

#UnitedStates #taxCuts #Capitalism #FederalUnemploymentInsurance #EmergencyUnemploymentCompensation #fiscalCliff

These workers have been unemployed for more than 79 weeks (about a year and a half). They have run through both the regular state unemployment insurance benefits, which last for six months, and the Federal Emergency Unemployment Compensation (EUC) program, which extends benefits for another year. The federal EB program adds an additional 13 to 20 weeks of unemployment insurance for jobless workers in states with high unemployment.

Back in February, Republicans in Congress forced the end of the federal EB program in exchange for voting for an extension of the EUC and also the payroll tax cut. But the entire federal EUC program is scheduled to end Dec. 31. This has the potential to cut off more than 2.5 million more unemployed from their benefits. With more than 12 million people officially out of work, and more than 7 million more working part time because they can’t find a full-time job, this is a terrible time to be cutting unemployment insurance. The average length of unemployment is still hovering around 40 weeks (almost ten months); jobless workers need the federal programs.

Because of these cuts, a smaller and smaller percent of jobless workers are collecting unemployment insurance benefits. From 2010 to 2011, the fraction of unemployed who were collecting benefits fell from 67% to 54% and by the end of this year less than half will qualify. If the EUC is not renewed by Dec. 31, then only about a quarter of the jobless will be able to collect benefits in 2013.

While federal unemployment insurance benefits need to be renewed and even extended, what is really needed is a federal jobs program. There are still more than three jobless workers for each job opening, and the economy still has 5 million fewer jobs than when recession began in December 2007. At the current rate of job creation, it will take about four years for the economy to gain back just the jobs that it lost, not to mention the millions of new jobs needed for young people coming into the labor force. Only a massive federal jobs program, like the Works Progress Administration (WPA) during the Great Depression of the 1930s, can bring millions of people back to work.

#SanJoséCA #Unemployment #Capitalism #FederalUnemploymentInsurance

Camp’s bill would eliminate Tier II of the federal Emergency Unemployment Compensation (EUC) program, which offers 14 weeks of benefits to jobless workers who have gone through their state benefits and Tier I of the EUC. There are over 800,000 jobless workers collecting Tier II EUC benefits. The bill would also cancel Tier IV of EUC, which is an additional 6 weeks of benefits for those in high-unemployment states. This would affect over 175,000 unemployed collecting Tier IV EUC benefits.

The federal Extended Benefits (EB) program, which provides up to 20 weeks of unemployment insurance benefits in states with high unemployment to those who have run out of EUC benefits, would be wound down. This would affect more than a half a million long-term unemployed on the EB program. All together more than a million and a half jobless workers would be affected if this bill were to become law.

The Republican proposal would hit jobless workers in the states with the highest unemployment rates the worst, as their total (federal and state) benefits would shrink from 99 weeks to a maximum of 59 weeks. The average length of stay on unemployment is at a record high (going back to 1948) at over 40 weeks. With eleven states having double-digit unemployment rates, and four unemployed looking for work for every job opening, this bill is cruel attack on those who are suffering the most from the depression that the country’s job market is in.

This bill adds insult to injury by opening the door to mandatory drug testing for those applying for unemployment insurance benefits. Rather than recognizing the lack of jobs is causing high unemployment, this suggests that the reason people are collecting unemployment insurance is to be able to feed their drug habit while not working. HR 3630 also requires people who didn’t graduate from high school to enroll in a G.E.D. program, at a time when adult education is being cut back across the country.

Even worse, the Republican bill would allow some states to divert moneys for unemployment insurance benefits to other programs. It would also allow states to reduce benefits for their jobless workers. With less than three weeks to go before funding for federal EUC and EB ends, this is no time for the Republicans in Congress to be trying to ram through cuts in unemployment insurance.

#SanJoséCA #Unemployment #FederalUnemploymentInsurance

San José, CA – On June 24, Republican Senators, along with Nebraska Democrat Ben Nelson blocked a vote on extending Federal Unemployment Insurance benefits. After the 57-41 vote to end debate (60 votes are needed in the Senate to stop arguing and start voting), Democratic Senate leader Harry Reid of Nevada pronounced the measure dead.

More than a half a million jobless workers who were receiving unemployment insurance benefits under the Federal Extended Benefits program have already been cut off, whether or not they received the up to 20 weeks of extended benefits promised under the law. Another 600,000 or more unemployed receiving Federal Emergency Unemployment Compensation (EUC) have also had their checks cut off. Another 200,000 jobless will lose their EUC benefits each week when they complete the ‘tier’ of benefits (there are four tiers to the EUC, providing additional 20, 14, 13, and 6 weeks of benefits). By the end of November a total of more than five million people will be cut off, or more than half of everyone who was collecting unemployment benefits.

This will leave only 26 weeks, or half a year, of state unemployment benefits, at a time when almost half of all unemployed have been out of work for more than six months. Many state unemployment benefit funds have already run out of money, and are continuing to make payments with loans from the Federal government. There is no way that states can extend their unemployment benefit programs. To make matters worse, the unemployment benefits bill killed by the Senate Republicans also had moneys to aid states with their rising health care costs, forcing states to cut education and health care programs and/or raise taxes.

While almost all the Democrats voted for extending the unemployment benefits, they have refused to use the ‘reconciliation’ rule that would allow them to end debate by a simple majority vote and then pass the extension. The reconciliation rule was designed to pass budget-related bills. The Democrats used the reconciliation rule to pass their health care reform in the spring, while Republicans used this rule to help pass tax cuts for the rich under the Bush administration.

This is a problem for working people. The Republicans are outspoken in support of big business and are willing to push hard on tax cuts to benefit the rich. The Democrats claim to be for working people, but they get their money from the same corporations as the Republicans. The Democrats only want to do enough to get our votes at election time and are not willing to go to the mat on matters like unemployment insurance (health care reform was another matter, with big health insurance and drug companies benefiting from government subsidies). Unfortunately, the whole electoral system is rigged in the interests of corporations and the rich. Working people have to organize ourselves and raise a storm of protest that can force the Senate to pass an extension to unemployment insurance benefits that will last as long as the unemployment rate stays high.

#SanJoséCA #EconomicCrisis #FederalUnemploymentInsurance