For almost as long as there has been a Congress, there has been an August recess. It’s origins can be traced to everything from a desire to go home and farm to a distaste for Washington’s oppressive summer heat in a era before air conditioning. Abraham Lincoln professed a particular loathing for the capital’s summer weather.
In the 21st Century, the August recess is largely a time for members of Congress to meet face to face with the people we represent. Although Congress meets in Washington, the people are not. Spending longer periods of time at home reminds us of the needs and wants of those people in California or Texas or Ohio, rather than only the wants of those inside the beltway.
We recessed just before 2:00am on Saturday morning after a rather frantic and productive week. Here are the two most significant pieces of legislation that passed during the days and nights that preceded that recess:
Death Tax/Minimum Wage: Last year the House passed a full repeal of the death tax which failed to garner the requisite 60 votes in the Senate. Last month, I wrote about a compromise passed by the House to permanently reduce the death tax. However the Senate never brought it up for a vote. Last week, we tried again. This time the death tax reduction is phased in from now until 2015 rather than taking full affect in 2010. Also, the bill (HR 5970) included a bevy of miscellaneous tax provisions like an extension of the R&D credit for businesses and the deductibility of sales taxes for people in states without a state income tax.
Also added to this bill was a phased-in substantial increase in the minimum wage from the current $5.15 an hour to $7.25 per hour by June 1, 2009. I told you in last week’s report that I expected action on this in September. Well, negotiations with the Senate produced faster action. I also told you that I think the minimum wage costs jobs and is not good economic policy. But I also told you that 19 states representing more than half of the U.S. population already have state minimum wage laws in excess of the federal amount, so that the negative economic impact of this will be muted.
So I voted for the bill because I believe that the positive economic impacts of the death tax reduction would exceed the negative impact of the minimum wage increase. The bill passed comfortably by a vote of 230-180.
What really surprised me is how few Democrats supported it. They have been the main champions of a minimum wage increase of exactly this amount, yet only about 1 of every 6 Democrats voted for it. Ostensibly, most voted no because they so oppose any reduction in the death tax. But 9 more of them had voted for a stand-alone reduction in the death tax last month than voted for this bill with a lesser death tax reduction and a minimum wage increase. On the floor, they said they were "offended" by the packaging of this bill. I think they were offended that Republicans were moving forward on two popular proposals at once.
The Senate is still in session and is scheduled to take up the bill this week. Minority Leader Reid (D-NV) has said that the bill is dead. We’ll see. It may be hard for members of the Senate to explain a vote against two proposals that most of them have said they support.
Pensions: The pension system in this country is a mess. Social Security is in trouble. Many local governments and school districts have unfunded and unrecorded pension liabilities. And the troubles with pensions at the airlines and car companies have been well publicized. A bill passed Friday night (HR 4) will begin a process of repairing this at least on the non-government pension side. The bill passed 279-131.
The bill is hundreds of pages long so I’m not going to fill up your whole day by trying to explain it all to you. But suffice it to say that the main elements of the bill stop the practice of companies promising a pension to employees and then not funding it. It will not permit companies or unions to give pension increases unless the current pension is funded. And, it allows a transition from the defined benefit plans of old to defined contribution plans or a new hybrid called a cash-balance plan. It also contains a number of IRA and 401k enhancements.
Like all huge bills, it has some stuff I don’t like in there like assistance for the troubled airline pensions. But since I’m writing you this while on one of those airlines flying back to California, I think I’ll dim my screen so the flight attendants don’t spill coffee on me for that remark.
On balance, though, it’s a very good bill that is now in the Senate. It has generally been a good week. We will now see if the U.S. Senate will make it a good month.
