After yesterday's failure to get enough votes to move forward on emergency spending to help the unemployed and get critical funding to states, Baucus has scaled down the bill. Maybe now it's just a minor emergency.

The spending reductions — estimated near $20 billion — are accompanied by tax changes tailored to the small-business concerns of Sen. Olympia Snowe (R-Maine) as well as venture capital and real estate interests with influence in both parties. In the bargaining now, Senate Majority Leader Harry Reid, up for reelection in cash-strapped Nevada, is still holding onto a $24 billion, six-month extension of federal Medicaid assistance from January to June next year. The money is vital to the finances of states like Reid’s, hit hard by the economic downturn, and he has the support of President Barack Obama. But the cost of the Medicaid funding makes the program an easy target, and the dollars may still have to be scaled back to win the swing vote of Snowe’s fellow Maine Republican, Sen. Susan Collins.

The word coming out of D.C. now is that Snowe and Collins are demanding massive cut to that state aid, known as FMAP, in return for their cloture votes. As many as 900,000 jobs are on the line in the states. Maine isn't going to be immune from those cuts, where the "shortfall in the budget that begins July 1 would be at least $85 million."

While Snowe and Collins are holding out their votes on cloture--just like they did in order to get state aid stripped out of the original stimulus package--Snowe along with others are fighting to protect the tax loopholes that hedge fund managers and S corporation executives have enjoyed for years.

Sen. Evan Bayh (D-Ind.) said he remained worried by the cost of the package and failure to do more about long-term deficits. But in the process, he also won concessions for his state related to disaster low-income-housing tax credits. And Bayh was also party to a deal with Baucus engineered by Sen. Mark Warner (D-Va.) that will further soften House-backed tax reforms targeted at investment-fund managers who now shelter their income at lower capital-gain tax rates.... In the case of Snowe, her greatest tax concern has been a second reform meant to end a similar abuse under which small-business S corporations are used to shelter income as dividends — exempt from payroll taxes. This abuse has become a greater cost to the Treasury as the Medicare tax rate has gone up for the wealthy, but Snowe has wanted more refinement so the reforms don’t create problems in themselves and unfairly impose new charges on small-business owners.

Olympia Snowe and Susan Collins, along with those "moderate" deficit peacocks, are putting more hurt on the people who are already hurting and even trying to increase their ranks so that they can lessen the burden on hedge-fund managers. If 900,000 more Americans lose their jobs, you can point the finger at the Maine twins.

Snowe's DC office: (202) 224-5344

Collins' DC office: (202) 224-2523