House passes tax breaks for newly hired employees

WASHINGTON -- Despite doubts among many lawmakers that it'll create many jobs, the House on Thursday passed legislation giving companies that hire the jobless a temporary payroll tax break.

The measure passed 217-201 on a mostly party-line vote. The bill also extends federal highway programs through the end of the year.

Some Democrats feel the approximately $35 billion jobs bill is too puny, while others say the tax cut for new hires won't generate many new jobs. However, the pressure is on to address jobs and deliver a badly needed win for President Barack Obama and a Democratic Party struggling in opinion polls and facing major losses in the upcoming midterm elections. Further jobs measures are promised.

"If that's the only thing that I can vote on ... I'll vote for it, obviously," said Rep. Bill Pascrell, D-N.J. "We've got to get something moving. We've got to get something done."

"It's really not a jobs bill," said Rep. Barbara Lee, D-Calif. "It's one small piece." Lee said she instead wants money in the legislation for job training and youth summer jobs.

The House had passed a much larger measure in December that contained almost $50 billion in infrastructure funding, $50 billion in help for cash-starved state governments, and a six-month extension of jobless aid. That bill conspicuously left out the proposals to award tax credits for hiring new workers. House Speaker Nancy Pelosi was among those skeptical of that idea.

The Senate responded last week with the far smaller measure that the House is reluctantly accepting. The House amended the measure Thursday to conform with so-called pay-as-you-go budget rules that have become an article of faith among moderate Democrats.

The minor tweak means the Senate would have to act again before Obama could sign the bill into law.

The $35 billion bill -- blending $15 billion in tax cuts and subsidies for infrastructure bonds issued by local governments with the $20 billion in transportation money -- is far smaller than the massive economic stimulus bill enacted a year ago.

The jobs bill has been a source of tension between House and Senate Democrats.

"It's ridiculous that it's taken so long for the Senate to overcome indifference and obstruction to finally send a bill back to the House which represents just a fraction of what we need to do to help the unemployed," said House Appropriations Committee Chairman David Obey, D-Wis. "But better late than never, and better something than nothing."

Across the Capitol, the Senate is debating a far more costly measure to clean up a lot of unfinished business from last year. The $100 billion-plus bill would extend unemployment assistance, revive a bevy of expired tax breaks, help states with soaring Medicaid costs and prevent doctors from having to absorb big cuts in Medicare payments. The popular initiatives are traditionally extended on a bipartisan basis for brief periods of time, which hides their long-term costs.

The Senate plans to act on the jobs bill after wrapping up the unfinished-business bill, which means it probably won't be sent to Obama until next week.

The jobs bill contains two major provisions. First, it would exempt businesses hiring the unemployed from the 6.2 percent Social Security payroll tax through December and give them an additional $1,000 credit if new workers stay on the job a full year. The Social Security trust fund would be reimbursed for the lost revenue.

Second, it would extend highway and mass transit programs through the end of the year and pump in $20 billion in time for the spring construction season. The money would make up for lower-than-expected gasoline tax revenue.

Small businesses would continue to be able to write off equipment purchases as a business expense. Much of the bill is financed by cracking down on offshore tax havens.

Several lawmakers in both parties criticized the payroll tax break, saying that it wouldn't do much to create jobs and that the bulk of it would go to employers for new hires that would be made anyway.

"It simply encourages conduct that would occur anyway," said Lloyd Doggett, D-Texas.

Rep. Steve LaTourette, R-Ohio, said he asked businessmen at town meetings in his Rust Belt district whether they would hire people based on the payroll tax holiday. "Nobody raised their hands," LaTourette said. "This is not going to create one job."

"It's an insipid, weak piece of legislation," said Jim McDermott, D-Wash.

"It's not that good, but it's better than nothing," said Jim McGovern, D-Mass. "And we're going to have to do more. But the bill that I would have liked to have seen pass can't pass the United States Senate."

Economist Mark Zandi of Moody's Economy.com said the new hiring tax credit could spur creation of about 250,000 new jobs. The economy has shed 8.4 million jobs since the recession began in December 2007.

------

Associated Press writer Stephen Ohlemacher contributed to this report.