Why Did Democrats Reject the Republican Stimulus Plans?

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Republicans blocked a Democrat-supported bill to extend relief to cash-strapped families and states. This morning, I despaired. Then I called Senate Minority Leader Mitch McConnell's office to listen to reasons why I was wrong to mourn ... or at least to blame Republicans for my despair.

"We offered legislation for both short term extensions that were fully paid for," said Don Stewart, communications director for Senate Minority Leader Mitch McConnell. "We used their own offsets to pay for it. And they wouldn't do it."

What did Republicans propose? A long-term plan that would cut the deficit and super-short-term plan that would only extend unemployment insurance for a month. The Thune amendment, which had wide Republican support and was cosponsored by McConnell, would extend unemployment benefits, protect doctors from a painful cut under Medicare, rescind the tax increases in Baucus bill, and mop up nearly $40 billion of red ink. How? By slashing the federal government's non-military discretionary spending.

The instinct to balance spending is generally admirable, but in a slow recession it's dangerous (see 1937) and Thune's cuts would be draconian. As James Horney at the Center on Budget and Policy Priorities writes, he would cut more than 20 percent of total 2010 funding from the affected, non-military agencies.

Second Republicans offered a short-term solution. Sen. McConnell took the Democrats' own spending cuts, found it would pay for a 30-day extension of unemployment benefits, and proposed an amendment to extend unemployment benefits by 30 days. If you're a deficit hawk, you're bound to see this as a reasonable compromise. If you're a stimulus advocate, you're bound to see this as the equivalent of fixing a broken leg with scotch tape: too small and too short-term.

At the end of the day, Stewart told me, this wasn't a debate about jobless benefits. It was a debate about red ink. "Both sides agree on the need to extend unemployment insurance and COBRA," Stewart said. "One side wanted deficit spending, and one side wanted to pay for it. One side wanted higher taxes, and another did not."

We're projected to add $9 trillion to the debt in the next decade. Is blocking $30 billion of unemployment benefits really going to dig us out? "Well two things," he responded. "One is that's how you get to $13 trillion. It's $10 billion here, $30 billion there. That's how you get to $13 trillion in debt. You don't have to go into deficit spending. As we've shown bill after bill after bill, you don't have to go into debt to extend unemployment benefits. Our amendments are fully paid for. It's not mutually exclusive."

The American Jobs and Closing Tax Loopholes Act is dead, for now. Republicans wanted the bill truncated or paid for with deep spending cuts, and Democrats couldn't find enough offsets that to appease the powerful minority. In the short term, two million unemployed people will have lost their benefits by the end of the year.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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