LEWISTON — What’s the difference between responsible federal spending and irresponsible debt? U.S. Sens. Olympia Snowe and Susan Collins drew their lines in the sand in a vote last Thursday on a spending package before the U.S. Senate that would provide states with $16 billion in additional Medicaid funding and extend unemployment benefits for hundreds of thousands across the country.

Maine’s moderate Republican senators voted against the latest version offered on Thursday, which was pared down at their request from initial drafts. It failed by a 57-41 vote; 60 votes were needed for passage.

Despite expressing support for the measure’s aims, the pair remains opposed to it because of a series of tax increases used to pay for the spending would adversely impact Maine small- and medium-sized businesses. Snowe said in a floor speech just before Thursday’s vote that she had been told by Senate Democratic leadership that the tax language concerning S-corporations was going to be removed — but it was not. The provision helps off set the cost of the overall bill.

At home, Snowe and Collins are the targets of a $100,000 advertising campaign paid for by national labor and advocacy groups blasting them for their continued opposition to the spending measure, which would have added $33 billion to the national deficit, which sits at about $13 trillion. Local liberal groups have also been critical of the senators. And Maine’s budget has a $85 million placeholder in anticipation of the enhanced Medicaid funding allocation. Without congressional action, state officials will have to begin curtailing spending in order to stay whole. 

“There is no substantive reason for the impasse that we’ve arrived at on this package,” Snowe said to her colleagues on the Senate floor on Thursday. “I’ve sought to balance the necessity (of spending) by identifying tax offsets, by urging that stimulus spending be reprogrammed so that these funds are spent in a timely manner.”

The taxes contained in the bill that Snowe opposes would cost small businesses $9 billion in one provision and $13 billion in retroactive new taxes on companies that do business overseas in another provision, she said. The first provision removes a current payroll tax exemption for S-corporations on the dividend contributions paid to family members who are shareholders or partners and also on retained earnings that are reinvested into the business, according to Snowe.

“We don’t have a growth strategy, we have a tax strategy,” she said in a floor speech, which turned into a 45-minute lecture to her colleagues, many of whom were gathered in anticipation of the vote that followed.

“Somehow we think that there is not a cause and effect or a correlation between what we do here and what happens across America,” she said. “It’s a matter of practicality and reasonableness that we get it right and not force more taxes on the very entity that we depend on to create the jobs that people deserve in America today to go back to work.”

Collins, in an interview on Friday, said she agreed with Snowe that re-appropriating unspent stimulus funding to pay for the underlying bill was a better solution than the controversial taxes.

“I worked hard to try to lower the cost of the bill and we were successful in that regard; I support both the extension of the state Medicaid enhanced money and also the extension of unemployment benefits. The problem is that the bill also included a lot of tax increases,” Collins said. “Olympia worked very hard to try to reduce a burden that was going to be placed on S-corps and unfortunately and inexplicably the Democrats reneged on the agreement they made with her. I felt that was really unfair and that I should support her in her decision to vote against the bill based on those grounds.”

Collins said Republicans have offered alternatives to help pay for the measure, only to be rebuffed by Democrats.

“There are too many people in Washington who are willing to score political points without regard to who’s hurt and we’ve just got to get past that,” she said.

But Kit St. John, executive director of the Maine Center for Economic Policy Center, a liberal think tank, says it’s Snowe and Collins who are trying to score political points by drawing an arbitrary line in the sand on spending.

“Both senators supported much larger bills in March and the only thing that’s changed since then, at least as far as we can tell, is a perception of a political environment; it seems to me the explanations have not been adequate to make the case that those tax provisions affect as broad a spectrum of Maine taxpayers as has been suggested,” he said. “About 30,000 people will lose unemployment benefits over the next six months in Maine and the state budget’s out $85 million and that seems important enough to move forward. And (it’s not fair) to blame the majority for not going all the way when they have in fact gone quite a distance to accommodate the concerns raised.”

David Farmer, spokesman for Gov. John Baldacci, said the governor was disappointed the measure failed, but was in touch with both senators on the issue.

“The (Medicaid) extension is important to the state and we still have too many people unemployed and too many people that have been unemployed for a long time and by not extending those benefits it’s going to be hard for them,” he said on Friday. “But the governor is also aware of the balancing act that’s going on in Washington between trying to spark the economy and trying to control spending on the federal level.”

Snowe, in her speech and in a letter sent to the Senate Majority Leader Harry Reid on Friday, has said she would support a stand alone measure that extended the unemployment benefits even if it went unpaid for. She said she suggested it to Reid two weeks ago, but he declined to proceed that way. Democrats lost their 60-seat majority earlier this year and have often struggled to find Republicans willing to vote with them in order to overcome the near constant filibustering of the minority party. That means they often need 60 votes to pass legislation in the Senate, rather than a simple majority.

“More than 70 percent of the American people believe America is moving in the wrong direction with respect to the economy and yet we have failed to address it satisfactorily because we’re not willing to listen, we’re not willing to work and we’re not willing to do the things that are necessary to create the right kind of legislation,” Snowe said.

It’s unclear if or when Reid will try to move similar legislation forward again.

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