Congress approves payroll tax cut

Rep. John A. Boehner , House speaker: "This is an economic relief bill, not a growth bill."
Rep. John A. Boehner , House speaker: "This is an economic relief bill, not a growth bill." (Associated Press)

In a rare bipartisan agreement, lawmakers extended the reduction for 160 million workers.

Posted: February 19, 2012

WASHINGTON - Congress on Friday overwhelmingly approved extending a payroll-tax cut for 160 million workers through the end of the year, probably the biggest accomplishment lawmakers will be able to savor in 2012.

The rare bipartisan agreement, which also provides jobless benefits to the long-term unemployed and preserves Medicare payment rates to physicians, came without the hostility that has scarred economic debates since President Obama took office in January 2009.

The House voted 293-132 to approve the plan. Minutes later, the Senate agreed, 60-36.

Under the bill, Social Security taxes for workers will remain at their current 4.2 percent level this year on wages up to $110,100. The rate was scheduled to go up by 2 percentage points next month. Friday's fix assures that the average worker earning $50,000 a year would keep getting a weekly break of $20.

Medicare payments to doctors, which had been scheduled to drop by 27.4 percent, will stay at current levels. Extended unemployment benefits for people who have been out of work for long stretches will continue, though for shorter periods.

Obama planned to sign the bill "right away when I get home," he told an audience at a Boeing plant in Everett, Wash., where he was wrapping up a three-day West Coast swing that included eight campaign fund-raisers. He was due to return to the White House at 12:45 a.m. Saturday.

The legislation was crafted with unusual speed and bipartisan cooperation. Congress' approval rating has hit record lows in recent Gallup polls - it was at 10 percent earlier this month - and most lawmakers face reelection in the fall.

Sen. Pat Toomey (R., Pa.) voted against the legislation; Senate Republicans overall opposed the bill by a 2-1 margin. All other Philadelphia-area senators and House members voted in favor of it.

Serious budget issues remain. Congress is supposed to approve an outline for the fiscal 2013 federal budget by mid-April, but few expect that to happen. Most anticipate little, if any, serious action on major deficit-cutting until after the Nov. 6 elections.

The bill has three major components:

The payroll tax. The extended tax cut could provide about a 0.6 percent increase in the gross domestic product, some economists said - enough to help give the still-fragile economy a boost.

Medicare. The "doc fix" keeps payments to physicians and other health-care providers at the current rates for the next 10 months.

Unemployment benefits. Most Democrats have argued there is no need to pay for such aid with budget cuts elsewhere or increases in revenue during tough economic times; Republicans insisted not only on paying for the benefits, but also on making some changes.

The current maximum duration of benefits, 99 weeks, will remain until May. After that, the maximum will drop in stages, in most cases to 79 weeks during the summer and 73 in September. The maximums depend on a state's unemployment rate.

States will be allowed to drug-screen unemployment applicants who lost their jobs because of drug use or are required to get drug tests for their jobs.

Friday was a day for lawmakers to show they could get something done, though most conceded it was a small step.

House Speaker John A. Boehner (R., Ohio) said, "This is an economic relief bill, not a growth bill."

House Minority Leader Nancy Pelosi (D., Calif.) said: "This is very important to continuing the economic recovery in our country," adding that the bill would help "to buy groceries, to buy gasoline, to make ends meet."

Lawmakers congratulated themselves on finally reaching a quick compromise.

The Founding Fathers "knew that even a divided government must still govern. And that is what we are doing here today," said Rep. Dave Camp (R., Mich.), chairman of the House Ways and Means Committee.

Not everyone was pleased about the compromise bill.

The payroll-tax break will cost about $94.5 billion, and it won't be paid for. The other provisions, costing about $49.5 billion, will be offset by a series of budget reductions and revenue-raisers, including auctioning part of the electromagnetic spectrum that TV broadcasters use, cutting money aimed at improving preventive health care, and increasing new federal employees' pension contributions.

The pension provision was controversial. "Federal employees are not a piggy bank," protested Rep. Elijah Cummings (R., Md.).

Added Rep. Jim Moran (D., Va.), "The whole country is going to pay a price for the signal this bill sends."

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