On Monday, President Obama struck a tentative deal with Republicans that includes a payroll-tax cut for all workers in 2011 in exchange for extending emergency unemployment compensation for the next 13 months. Of the 19,000 unemployed in Santa Barbara County, 9,583 people receive unemployment benefits. In October, more than $11 million was paid out in unemployment benefits in Santa Barbara County. Farming, government, transportation, and the hospitality sectors make up the biggest areas of unemployment in the county. Santa Barbara currently has an unemployment rate of 8.9 percent.

Lois Capps
Paul Wellman (file)

Representative Lois Capps said that she favors the move to extend unemployment benefits and extensions because the people who receive unemployment checks put that money back into circulation. “Extending unemployment insurance isn’t just the right thing to do; it’s good policy,” Capps said in a statement. “Recipients of unemployment benefits use them immediately — to pay the rent and put food on the table — injecting demand into the economy.”

A recent study by Moody’s Analytics found that every dollar spent by the government for the unemployed produces an overall return of $1.61 for the economy. Capps’s press secretary, Ashley Schapitl, said that Capps disagrees with extending tax breaks for the rich because that money would likely be put into savings. “Giving tax cuts to the upper 2 percent would likely be saved and not be injected back into the economy,” Schapitl said. “We shouldn’t be borrowing money and increasing benefits to people of the likes of Warren Buffet.”

Despite Obama’s 2008 campaign promise to shut down Bush-era tax cuts for households earning more than $250,000 annually, he agreed to extend the breaks for two years, with the ability to extend unemployment checks to the 9.8 percent of Americans who are unemployed in mind. According to Schapitl, at least 95 percent of households in the 23rd District are below the $250,000 threshold.

“[Representatives Capps] is deeply dismayed that Senate Republicans are willing to hold tax cuts for more than 95 percent of families in California’s 23rd Congressional District hostage to give the wealthiest Americans a tax cut that will increase our already large federal deficit,” Schapitl said in an email. “She will scrutinize the White House proposal to determine whether the framework put forth does enough to help middle-class families to warrant her support, despite her opposition to continued tax cuts for the wealthiest 3 percent of the country.” Based on the Treasury Department’s preliminary estimates, the cost of extending the tax cuts is likely to range anywhere from $200 billion to $500 billion, depending on whose cuts are extended and for how long.

Obama’s plan would also renew jobless benefits for the long-term unemployed and grant a one-year reduction in Social Security taxes paid by workers but not by employers. Unless Congress takes action, this week would be the last week of extended federal unemployment benefits. Under his plan, unemployment benefits would remain in effect through the end of next year for workers who have been laid off for more than 26 weeks and less than 99 weeks. According to the Associated Press, on a national level, two-million individuals would have lost their benefits over the holidays without the extension, and seven million — 400,000 in California  — would have done so by the end of the year. Obama’s proposal also would extend a variety of other tax breaks for lower- and middle-income families, including the Earned Income Tax Credit and the child tax credit.

The proposed Social Security tax cut would apply to virtually every working American. For one year, workers would pay 4.2 percent of their income, instead of 6.2 percent. In the coming weeks, Congress will vote on the White House compromise.


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