A big tax present for 160 million wage-earners
WASHINGTON — Americans are getting an election-year tax present. Congress voted with rare speed and cooperation Friday to extend a Social Security payroll tax cut for 160 million workers and to renew unemployment benefits for millions more who haven’t seen a paycheck in six months.
With lawmakers’ ratings in the gutter, the legislation sped through both the House and Senate and was on its way to President Barack Obama, who saluted the quick passage.
Taxpayers have grown accustomed to the 2 percentage point cut in the payroll tax over the past year — around $80 a month for someone earning $50,000 a year — and it now will be continued. So will jobless benefits averaging about $300 a week for the long-term unemployed.
Both provisions, which were to expire in less than two weeks, had been extended only two months during a December congressional fight that seared Republicans. They were determined to avoid a repeat in campaign season.
The hard-fought — but ultimately bipartisan — measure contains the core of Obama’s jobs agenda and promises to pump more than $100 billion into the economy before Election Day. It hands the president a political victory as well, as Republicans called a tactical retreat in hopes of minimizing the gains for Obama and his Democratic allies on Capitol Hill.
The Senate approved the measure on a bipartisan 60–36 vote minutes after the House passed it on a sweeping 293–132 vote. Obama is expected to sign it shortly after returning from a West Coast fundraising swing.
The hope is that the dual measures will inject consumer demand and support a fragile recovery from the worst economic downturn since the Great Depression. The legislation would also protect doctors treating Medicare patients from a steep cut in their reimbursements under an outdated funding formula, a reduction that threatened to make it harder for seniors to find physicians.
The tax cuts, jobless coverage and higher doctors’ payments will all continue through the end of the year.
Many Republicans opposed some or all of the legislation but were eager to wipe the issue from the election-year agenda. The measure would pack $141 billion onto the federal deficit over 2012–2013 and slowly recoup more than $50 billion of that over the coming decade.
It may also be the last major bipartisan legislation to make it through a bitterly divided Congress before Election Day. A pile of unfinished business — including expiring tax cuts, Pentagon budget disputes and another hike in the nation’s borrowing cap — awaits after the election in what promises to be a brutal lame duck session that Capitol Hill veterans are already dreading.
“It is amazing what happens when Congress focuses on doing the right thing instead of just playing politics,” Obama said at an appearance at a Boeing factory in Everett, Wash. “This was a good example, and Congress should take pride in it.”
In fact, politics has been woven into the struggle over the legislation, which, along with the divisive GOP primary campaign and improving economic news, has coincided with a lift in Obama’s poll numbers.
Friday’s votes also cleared away a political headache for House Republicans, still smarting from the battle in late December in which they blocked a two-month extension of the tax cut and jobless coverage, only to retreat after being portrayed as standing in the way of a tax cut for every American who earns a paycheck.
Since then, Republicans have made it clear they didn’t want a repeat of the December disaster.
“We’re dumb, but we’re not stupid,” Sen. John McCain, R-Ariz., told reporters after he voted. “We did not want to repeat the debacle of last December. It’s not that complicated.” McCain voted no, in part because the measure gives television broadcasting companies $1.75 billion in exchange for freeing communications spectrum for auctions to wireless companies.
Democrats took advantage of the GOP’s loss of leverage in this month’s House-Senate talks, forcing Republican negotiators to drop numerous House GOP provisions, including an effort to block new EPA rules on industrial boilers, a pay freeze on federal workers and an attempt to deny illegal immigrants a refundable child tax credit taken by low-income workers.
The top GOP negotiator, Rep. Dave Camp, R-Mich., said the final deal was the best Republicans could get given the balance of power in Washington.
“Democrats still control Washington — they control the Senate, and they control the White House,” Camp said. “A divided government must still govern.” Camp cited stricter job search requirements for people receiving unemployment benefits and other reforms to the program as wins for conservatives.
While a solid majority of Republicans in the House backed the measure, GOP opposition was stronger in the Senate, where Republicans voted against the bill by a 2–1 margin. Five Democrats and Sen. Bernie Sanders, I-Vt., opposed the measure, while 14 Republicans, including Minority Leader Mitch McConnell of Kentucky, backed it.
“I voted to extend the temporary payroll tax holiday because I didn’t want taxes going up next month on millions of Americans,” McConnell said. “I don’t think the American people should have to suffer any more than they already have as a result of this president’s failure to turn the economy around.”
Many GOP lawmakers were upset that the measure would add to the federal deficit and doubted that it would do much to boost the economy. Another concern was that it cuts a payroll tax that’s dedicated to paying Social Security benefits. Deficit spending would make up for the lost revenue, but some lawmakers fear it would chip away at Washington’s commitment to the program.
“I cannot and I will not support legislation that extends the payroll tax holiday without paying for it,” said Rep. Phil Gingrey, R-Ga. “This will add $100 billion to the deficit and it will create an even greater shortfall within the Social Security trust fund that already has over $100 billion shortfall just in the last two years.”
And the No. 2 Democrat in the House, Steny Hoyer of Maryland, excoriated the measure for cutting the retirement benefits of new federal hires.
“Nobody is targeted in this bill other than federal employees,” said Hoyer, whose Washington-area district is home to thousands of federal workers. “We ought to stop dissing them. We ought to stop demagoguing, we ought to stop using ‘bureaucrat’ as an epithet.”
Extending the 2-point cut in the 6.2 percent Social Security payroll tax would save a maximum of $2,200 for high-end earners.
The reduction in the Social Security payroll tax, which is deducted from workers’ paychecks, would cost $93 billion through 2022. In a sudden concession this week that made bipartisan agreement possible, House Republicans dropped their demand that the tax cut be paid for with spending reductions.
In a GOP win, coverage for the long-term unemployed would be cut from the current maximum of 99 weeks to a ceiling of 73 weeks by this fall in states with the worst job markets, with most topping out at 63 weeks. But Democrats extracted a concession so that states with the worst jobless rates would actually fare better in the next few months than they otherwise would have.
Of the $30 billion cost of the extended unemployment benefits, half would be paid for by government sales of parts of the nation’s broadcast airwaves, half by requiring federal workers hired after this year to contribute an additional 2.3 percent of their pay for their pensions, up from the current 0.8 percent.
Other costs would be made up by trimming Medicare reimbursements to health care providers to cover unpaid medical bills, cutting payments to hospitals that treat large numbers of poor patients and cutting a fund created in Obama’s health care overhaul for prevention efforts like battling smoking and obesity.