Congress nears deal to extend wage-tax cut, jobless benefits, 'doc fix'

McClatchy NewspapersFebruary 15, 2012 

WASHINGTON — Congress is calmly inching toward approving a payroll tax cut and other help for the struggling economy without the bitter rancor that's colored economic debates since President Barack Obama took office three years ago.

Lawmakers are widely expected to give bipartisan approval this week to extending the Social Security payroll tax cut, now scheduled to end Feb. 29, through the end of the year.

They're also likely to extend benefits for the long-term unemployed and to stave off a huge planned cut in Medicare payments to physicians.

All this is being done without the down-to-the-wire brinksmanship that characterized other Obama-era budget battles. This fresh outburst of comity was sparked by today's unpredictable politics and economics in an election year.

"The public wants action, and the economy needs help," said Darrell West, director of governance studies at the Brookings Institution, a center-left research group.

All 435 seats in the House of Representatives, as well as 33 in the Senate, are up for election this fall. Congress' approval ratings are dismal, and polling shows voters blame both parties for inertia in Washington. Few incumbents want to face voters who have suddenly found their paychecks have shrunk because Congress let the wage tax break expire.

"Maybe this will get our approval rating back to double digits," said Sen. John McCain, R-Ariz.

More than 160 million workers pay Social Security tax on up to $110,100 of their wages. The rate, now 4.2 percent, is scheduled to return to 6.2 percent next month unless the break is extended. The extension should save the average worker, earning $50,000 a year, about $20 per week.

At a time when the economy remains fragile, a reduction in workers' paychecks could be harmful, economists say.

Rescinding the cut probably would trim about 0.6 percent from the gross domestic product and depress the consumer's already delicate psyche, said Brian Bethune, visiting assistant professor of economics at Amherst College.

"If it were not extended, it's large enough that it would have a palpable impact," he said.

Not everyone is pleased.

"I don't see where a temporary tax cut helps the economy or helps people," said Sen. Jim DeMint, R-S.C.

Earlier this week, House Republican leaders gave up their effort to offset the tax break's estimated $100 billion cost to the Treasury. The federal deficit is estimated to reach more than $1.3 trillion this fiscal year, and adding to it remains a concern of many budget watchers.

Rep. Jack Kingston, R-Ga., noted that the GOP "worked really hard for offsets in the past and now we're giving that up." That bothered him, and he said he's leaning no.

"Just because tax cuts or spending measures are called stimulus doesn't mean they come without a price tag," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. At least pay for the extensions over a multi-year period, she said.

Some lawmakers thought that was possible in the future, with more spending cuts or tax increases, but not now.

"In the short term this needs to be done this way," said Senate Budget Committee Chairman Kent Conrad, D-N.D. "The problem with the economy has been lack of demand, and we need these steps."

He vowed to try to write a comprehensive budget that would address the higher deficit, but he conceded it will be tough to get it approved in an election year.

"I'm under no illusions," he said.

In the current legislation, the Medicare and unemployment plans would be paid for in a variety of ways. Details were still being worked out Wednesday. So was the length of the unemployment extension.

Currently, beneficiaries in some states can get up to 99 weeks of aid. Many Republicans think that's too much, and it's expected a compromise will reduce the maximum number of weeks, as well as make requirements for obtaining aid more stringent.

Medicare payments to physicians and other health care providers would drop 27.4 percent next month unless Congress acts. This annual "doc fix" is expected to maintain current reimbursement rates.

An agreement would have huge political benefits, experts said, particularly after an ugly deadlock over these same issues in December. Congress finally passed a two-month extension two days before Christmas.

A calmer vote this week would probably please constituents, West said.

"It would be a big plus for President Barack Obama," he said, "and it probably doesn't hurt Republicans, who can go home and say they voted for a tax cut."

(Steven Thomma of the Washington Bureau contributed.)

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