House Passes Obama's Tax Cut, Democrats Threaten to Kill It

House Republicans on Tuesday passed a package of unemployment benefits and a tax cut, but objections by Democrats and the president over several contentious provisions threaten to derail the measure and force a government shutdown. 

The Middle Class Tax Relief and Job Creation Act passed mostly along party lines 234 to 193, but Senate Majority Leader Harry Reid (D.–Nev.) has vowed to kill the bill and President Barack Obama issued a veto threat just hours before the House vote.

If Congress fails to act on the tax cut before leaving Washington this week, most Americans will see $20 missing from their weekly paycheck, and unemployed workers face a loss of some benefits.

President Obama is demanding Congress forgo their Christmas holiday and stay in town to pass a tax cut measure he will support, and White House officials are threatening a veto on the separate government spending bill needed to keep federal agencies operating past Friday until the tax cut is passed.

The controversial measure includes a demand on Obama to make a yes or no decision on the Keystone XL pipeline, an issue that has divided Democrat supporters in the green community who claim it will hurt the environment, and unions who want the 20,000 jobs created by the project.

“The president is going to have to decide, can he wait to create American jobs or can he not wait to run against us?” said Rep. Jeb Hensarling (R.–Texas), chairman of the Republican Conference. “It’s Christmas time, let’s deliver to the American people a jobs bill.”

Democrats called the bill political showmanship and said it is “shackled with unwanted baggage.”

“This debate should not be about scoring political points,” the White House Office of Management and Budget said in a statement. “This debate should be about cutting taxes for the middle class.”

The $200 billion package would extend for another year a temporary cut on the payroll tax giving an estimated 170 million Americans an extra $20 a week in their paychecks, and blocks for two years a reduction in doctor reimbursements from Medicare.

The Republican bill made up for the Social Security Trust fund losses by cutting government spending including their own paychecks. Tucked inside a provision freezing pay for federal workers is language that also blocks a pay raise for members of Congress. Those provisions are expected to save $26 billion, while changing the co-pay structure for retired federal workers would save another $36 billion.

To create new revenues, the measure raises billions in government fees including $38 billion for Government Sponsored Enterprise, and $16 billion from broadcast spectrum auctions.

It saves $4 billion by reforming the National Flood Insurance Program by eliminating some premium subsidies, creates new rules to prevent Social Security overpayments by $3 billion, and saves an additional $9.4 billion by blocking illegal immigrants from receiving checks from the IRS.

It also prohibits millionaires from being able to obtain unemployment insurance and food stamp benefits saving another $20 million.

“Attaching these riders are the kind of stunts that have made the American public cynical about Washington,” said Rep. Gerald Connolly (D.–Va.).

Rep. Sam Johnson, who authored the provision blocking illegal immigrants from tax refunds, said the measure specifically targets the child tax credit and will root out waste and fraud in the IRS.

“This will send a powerful signal that we are serious about getting our fiscal house in order,” Johnson said.

The bill extends unemployment but caps payments to 33 weeks from the federal government, which is in addition to the 26 weeks paid for on the state level. But Democrats objected to new reforms, including drug testing and a requirement for those who didn’t graduate high school to participate in GED programs.

Democrats said drug addicts don’t need testing, they need health care.

“This is outrageously partisan and unfair,” said Rep. James Clyburn (D.–S.C.). “It’s unfair to blame these folks for the economic hard times they’re experiencing. I don’t see anyone in the majority (Republicans) demanding drug testing for anyone who receives oil and gas subsidies.”

The measure raises fees that Freddie Mac and Fannie Mae charge for guaranteeing loans purchased for secondary mortgages and repeals $8 billion in ObamaCare mandatory funding from the prevention and public health fund.

Democrats want the tax cut to be paid for through tax hikes on those who earn more than $1 million a year.

“It’s not our dream proposal, believe me, but it does represent a middle ground and we ask the president to join us,” said House Majority Leader Eric Cantor (R.–Va.). “It’s time for the president to compromise as well.”

House Majority Whip Kevin McCarthy (R.–Calif.) said the question now is whether “Harry Reid will put people before politics?”

Added House Speaker John Boehner (R.–Ohio): “The Senate has to do whatever they have to do. Hopefully, Senate leaders will come to their senses.”

Reid said Republicans were wasting time with the bill he called “ideological candy” that catered to the Tea Party, and says it will not pass the Senate.

However, Senate Minority Leader Mitch McConnell (R.–Ky.) said Democrats are the ones playing politics with the proposal.

“It was surprising to say the least to read this morning that President Obama and Majority Leader Reid are now plotting to block this very legislation—even to the point of forcing a government shutdown—over the inclusion of a job-creating measure that the president thinks will complicate his reelection chances next year.”

Republicans pointed to layoffs announced Tuesday at an Arkansas company that has already built 500 miles of steel pipes for the Keystone project as evidence that Obama’s policies are costing American jobs.

“Unfortunately, despite bipartisan support for the pipeline, the president is bowing to pressure from his environmental base over the pipeline provision and is threatening to reject this legislation,” said Rep. Randy Hultgren, (R.–Ill.).

“The president should put the interests of hard-working American families above those of liberal interest groups and his own political well-being, embrace our legislation, and urge the Senate to pass it without delay,” Hultgren said.