US Senate OKs $59 Billion War Spending; House Stalls On Taxes

By John Shaw, 28 May 2010, WASHINGTON -- The Senate approved a $59 billion emergency spending bill Thursday evening.

The Senate passed the measure on a 67-to-28 vote after a nearly week-long debate.

The Senate supplemental spending bill includes about $45 billion in discretionary spending for operations related to the wars in Afghanistan and Iraq and a host of emergency items. Of this sum, about $33 billion will be used for the president's expansion of 30,000 additional American troops in Afghanistan.

The bill partially funds the president's request of $118 million for the Gulf of Mexico oil spill and $913 million for relief for Haiti. It also allocates $5 billion for FEMA to replenish its funds to deal with natural disasters.

The bill also includes $13 billion in mandatory funds to compensate Vietnam veterans exposed to Agent Orange.

Earlier in the day, the Senate defeated an amendment by Republican senator John McCain to allocate $250 million to fund the deployment of 6,000 Natural Guard troops to the U.S.-Mexico border. It would have funded this by tapping funds from last year's fiscal stimulus bill.

The Senate also rejected an amendment by Republican senator John Cornyn to fund $2 billion in new law enforcement personnel and equipment to the border, also tapping unused fiscal stimulus money.

All week, Majority Leader Harry Reid had said that the Senate would not leave for the Memorial Day recess until it passed both a war spending bill and a tax extenders package.

But as of Thursday night, Reid appeared relieved the Senate was able to pass the emergency spending bill.

House Democratic leaders said Thursday evening they are still trying to secure the needed votes to pass a scaled-back package of tax cuts and benefit extensions.

The $144 billion package would extend about a dozen tax cuts that expired at the end of last year, expand unemployment benefits, health insurance subsidies for unemployed workers, and provide Medicaid funds to the states.

The package is less costly than an earlier $192 billion version because a provision blocking scheduled cuts in Medicare payments to doctors would extend until 2011 rather than 2013.

Also, the extended UI benefits and health insurance subsidies for jobless workers would run through Nov. 30 rather than Dec. 31.

About $84 billion of the House package has been designed as an emergency and will not be offset.

The bill includes changes in the treatment of carried interest earned by private equity fund managers, venture capitalists, and real estate investors.

Under the plan, instead of being considered as capital gains, in the first two years of the bill, 50% of their carried interest would be treated as ordinary income for tax purposes. The remaining 50% would be taxed as capital gains. When the bill is fully implemented, 25% of carried interest would be taxed as capital gains and 75% as ordinary income.

There are indications that House Democratic leaders may need to reduce the $144 billion package even further to secure the needed votes.