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Senate Republicans—with the help of Sen. Ben Nelson (D-Neb.)—are poised to kill an economic benefits package today, delivering what could be a serious blow to the country’s recovery, as Matt Yglesias points out. Known as the “tax-extenders” bill, the legislation would continue unemployment benefits, support certain tax breaks, provide a boost to Medicare payments for doctors, and extend Medicaid funding to collapsing state budgets. Conservatives have raised a predictable hue and cry about increasing the deficit. Democrats, desperate to have the legislation pass, have scaled back the bill over the past weeks “from $190 billion, to $80 billion, to $55 billion, to just over $30 billion,” Arthur Delaney reports. But it hasn’t been enough to swing key moderate votes, and the legislation looks like it will fail, 42-58, this afternoon.

What’s the price of this political obstructionism? In addition to the millions of Americans who stand to lose unemployment benefits, a huge number of private and public sector employees will lose their jobs due to state budget cuts. Without federal help, states will have to pour in more money to prop up Medicaid, forcing them to make cutbacks in other parts of the budget. As a result, Moody’s chief economist estimates that 200,000 jobs could be axed without federal Medicaid support, and the Center for Budget and Policy Priorities puts the number as high as 900,000—jobs belonging to teachers, firemen, police, and social workers, among others.

While federal and state governments both contribute to Medicaid funding, the economic crisis has left the states in a terrible budget crunch. The federal government has tried to step in, devoting over 60 percent of the federal stimulus money to propping up Medicaid so states wouldn’t have to make other cuts. But that money is now set to expire, and the states have yet to recover from the effects of the recession to make up the difference.

On top of unemployment benefit cuts and job losses, the cuts to social services could be brutal. The WonkRoom explains:

Thompson pointed to a Center on Budget and Policy Priorities report stating that “without the extended Medicaid funding, Pennsylvania plans to cut funding for domestic violence prevention in half, eliminate all state funds for addressing substance abuse and homelessness, cut funding for child welfare by one-quarter, and cut payments to private hospitals, nursing homes, and doctors across the state — among other steps.”…

Arizona would have to cut funding for its state court system, Colorado’s likely cuts “include eliminating state aid for full-day kindergarten for 35,000 children, eliminating preschool aid for 21,000 children, and increasing overcrowding in juvenile detention facilities,” while New Mexico “could eliminate a wide range of Medicaid services, including emergency hospital services, inpatient psychiatric care, personal care assistance for the disabled, prescribed medications, and hospice care.”

Buried in the mess is a larger argument for federalizing Medicaid, which would free up state budgets and prevent these kinds of excruciating budget cuts every time state governments hit a rough economic patch. (Kevin brought up this point just last week.) But this is the system that we’re stuck with for now. The federal government needs to support it, and it’s unfortunate that our deadlocked Senate is about to deliver a painful setback to our economic recovery.

Update: As predicted, the tax extenders bill has failed in the Senate. Sigh.

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