Before departing on its holiday break, the Senate left a number of important issues unresolved, including the fate of the unemployment extension and tax extenders legislation, not to mention the financial reform bill.

After a number of attempts, the Senate failed to pass the unemployment and tax extenders legislation either together or separately. Democrats were unable to overcome Republican-led filibusters and may be forced into using unspent stimulus funds to pay for extending unemployment benefits for millions of people who have no regular income left to them. Last Friday’s discouraging jobs report highlighted the need for continued support of the unemployed, who are still feeling the lingering effects of the recession, like just about everybody else.

The tax extenders legislation is also a question mark, especially given the stiff resistance against raising the taxes on carried interest of hedge fund managers, private equity firm partners, venture capitalists and real estate investment partners. Even with various compromises in successive versions of the legislation that ratcheted down that particular tax hike, there was still enough opposition to sink the bill for now. The employment tax hike on professional services firms operating as S corporations did not help matters either, and even the AICPA and the National Society of Accountants registered their opposition on behalf of  the profession. The tax extenders legislation is essentially pitting lobbyist against lobbyist, as proponents of tax breaks for one set of business interests squares off against another, amid the backdrop of heightened concern over the growing federal budget deficit.

In fact, the current fight is only setting the stage for a battle to come once President Obama’s deficit commission issues its recommendations for ways to reduce the budget gap. Those recommendations are likely to include various spending cuts, tax increases and entitlement program curbs. We can expect many of the recommendations to be fiercely fought over, no matter how tentative they turn out to be.

Meanwhile, the financial regulatory reform bill, although it has already passed both the House twice and the Senate once, must still pass the Senate again in its conference committee form. That may not happen until West Virginia Governor Joe Manchin appoints a successor to the late Sen. Robert Byrd, unless a few more Republicans or Democrats can be coaxed to vote for it. That’s another of the lingering questions that will have to be resolved when the Senators eventually return from their barbecues and fireworks celebrations to deal with the inevitable fireworks in Washington.

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