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Analysis: How 2 million Americans lost their jobless benefits in an election year

Keeping unemployment benefits flowing for millions of workers whose jobs were eaten by the recession should have been a slam dunk in an election year.

But until this month, Senate Democrats have been unable to bring themselves to pass a simple bill that just does it. Instead they've demanded a series of unrelated and often controversial tax and spending add-ons that have enabled Republicans to mount successful filibusters.

Now that the legislation has been shorn of all the extras, the bill could win final passage soon. It can't come soon enough for more than 2 million people whose checks have been cut off in a five-month impasse in which there's plenty of blame to go around:

— Democrats and their leaders made several decisions that in retrospect look like miscalculations, like pulling the rug out from under a bipartisan measure launched back in February and loading a subsequent bill with $24 billion for governors — guaranteeing that most Republicans would vote against it.

— Republican moderates voted one way in March to help the bill pass but changed their minds just weeks later, having gotten religion from GOP leaders and tea partiers on the budget deficit.

Little remembered amid the ongoing partisanship and recrimination is that jobless benefits also got sideswiped by President Barack Obama's health care overhaul.

To reduce the health care bill's impact on the deficit, Democrats decided to close almost $30 billion in tax loopholes. Until the final health care push, those revenues had been designated to cover the cost of extending other popular family and business tax breaks as part of a broad bipartisan jobless benefits package.

Besides the jobless aid, the measure contained a payroll tax holiday for businesses, tax breaks for business, health insurance subsidies and help for doctors facing a cut in their Medicaid payments. It had support from across the political spectrum, from Obama to conservative Senate Republicans.

Some liberals, however, balked at the deal, which was cut principally by Senate Finance Committee Chairman Max Baucus, D-Mont., and the committee's senior Republican, Sen. Charles Grassley of Iowa. The liberals didn't like that their "jobs agenda" seemed hijacked by business lobbyists, who won items like research and development tax credits and some arcane measures such as tax breaks for NASCAR tracks. With unemployment hovering just under 10 percent, they also thought it was too light on subsidies for preserving and creating jobs.

So Senate Majority Leader Harry Reid blew up the agreement, instead advancing a pared-back jobs bill excusing businesses from having to pay the employer share of Social Security taxes this year on any new workers they hire. Economists were dubious it would produce many jobs. Meanwhile, unemployment aid would wait for later legislation.

"We could have had this bill passed in three days and ... Reid decided to scuttle it," Grassley complained. "Baucus read about it in the paper."

The delays meant that Congress had to pass a short-term extension of jobless benefits at the end of February. Reid and Senate Minority Leader Mitch McConnell, R-Ky., worked out a deal for a quick vote to avoid an interruption in benefits.

But another Kentucky Republican, Sen. Jim Bunning, single-handedly held up the bill for days, demanding that government spending elsewhere be cut to pay for the jobless benefits rather than add to the federal debt. Bunning folded on March 2. But his fight resonated with tea partiers and millions of other voters worried about year after year of trillion-dollar deficits.

In the meantime, Reid resurrected the longer-term jobless aid package. He mixed in familiar elements like extending expired tax breaks and added a $24 billion package of aid to cash-starved state governments so they could avoid layoffs of tens of thousands of public employees — a key part of last year's economic stimulus bill.

The result was a bill adding almost $100 billion to the deficit. That meant that GOP support would be limited. But it still passed in March with support from several Republicans, including key moderate Sens. Olympia Snowe and Susan Collins of Maine and George Voinovich of Ohio.

That was the bill's high point. The political sands soon began to shift.

Another short-term unemployment insurance extension — needed to buy time for negotiations on the bigger bill — came at the end of March. It would be the last. Beginning in June, hundreds of thousands of workers unemployed for more than six months started losing the weekly checks.

More Republicans picked up on Bunning's position and demanded cuts in other programs, including Obama's $862 billion stimulus bill passed a year earlier, to pay for the extension.

It was a message the party felt increasingly comfortable with after losing the health care fight, especially as the European debt crisis roiled the markets and the U.S. government's debt topped $13 trillion. Republicans stressed that with the unemployment rate still near double digits, jobless benefits averaging $300 a week should be extended — but that they should be paid for.

"You never know in politics when that magic moment comes when things really begin to change, but I believe that it has occurred now," GOP Whip Jon Kyl of Arizona told reporters March 26. "I think you'll see a much greater commitment now to fiscal responsibility."

The short-term jobless aid extension passed, but it took until late May for their House and Senate negotiators to agree on a longer-term jobless aid package featuring new business tax increases but still racking up $115 billion in new government debt over the next decade.

This time, conservative House Democrats recoiled. House leaders were forced to sharply pare the measure back, eliminating new aid for state governments as well as a longer-term fix for doctors threatened with a 21 percent cut in Medicare payments.

The House passed the bill on May 28, returning the measure to the Senate, where debate consumed the Senate's entire June schedule. Democrats still wanted to help governors with their payrolls but ultimately acceded to cutting it by one-third and paying for it partly with cuts from last year's stimulus bill. Even that measure failed just before Congress recessed for the July 4 holiday.

Reid is now resigned to a stand-alone six-month extension of unemployment benefits at a cost of $33 billion. Aides say he will try to pass it when West Virginia Gov. Joe Manchin names a successor to fill the seat of Democratic Sen. Robert C. Byrd, who died two weeks ago. Those who lost benefits will get them retroactively.

Democrats also maintain hopes of passing a $16 billion aid package for governors aimed at preserving the jobs of tens of thousands of state workers through the election. They intend to pay for it in part by cutting food stamp benefits.

___

EDITOR'S NOTE — Associated Press writer Andrew Taylor has covered Congress for two decades.

(This version CORRECTS Updates that benefits would be restored retroactively. Corrects that state aid package cost is $16 billion; adds photo links.)

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