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Obama Payroll Tax Cut: President Finally Scores Coveted Win

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The $143 billion payroll tax cut won by President Barack Obama may be the last significant measure he receives from a deeply divided Congress that promises to only get more polarized as Election Day approaches.
The $143 billion payroll tax cut won by President Barack Obama may be the last significant measure he receives from a deeply divided Congress that promises to only get more polarized as Election Day approaches.

WASHINGTON -- The $143 billion payroll tax cut won by President Barack Obama may be the last significant measure he receives from a deeply divided Congress that promises to only get more polarized as Election Day approaches.

Obama's coveted renewal of the payroll tax cut for 160 million workers and jobless benefits for millions more caps a five-month campaign-style drive against reluctant Republicans.

Under the bill Congress approved Friday, workers would continue to receive a 2 percentage point increase in their paychecks, and people out of work for more than six months would keep jobless benefits averaging about $300 a week, steps that Obama says will help support a fragile recovery from the worst economic downturn since the Great Depression.

It would also head off a steep cut in reimbursements for physicians who treat Medicare patients.

The tax cuts, jobless coverage and higher doctors' payments would all continue through 2012.

Passage of the legislation hands Obama a victory over objections from many GOP lawmakers who oppose it but were eager to wipe the issue from the election-year agenda.

It also clears away a political headache for House Republicans, who blocked a two-month extension of the tax cut and jobless coverage in late December, only to retreat quickly under a buzz saw of opposition from conservative and GOP leaders from around the country.

With that history, Republicans seemed ready to get the fight behind them and change the subject for the rest of this election year.

"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."

Republicans said the final deal, significantly changed from a tea party-backed measure that passed in December, was the best Republicans could get.

"We don't control Washington. Democrats still control Washington – they control the Senate, and they control the White House," said Rep. Dave Camp, R-Mich., the top House negotiator on the measure. "A divided government must still govern." Camp cited stricter job search requirements for people receiving unemployment benefits and other changes in the program as wins for conservatives.

Extending the 2 percentage point cut in the 6.2 percent Social Security payroll tax would save around $80 monthly for someone earning $50,000 a year and give a maximum cut of $2,200 to 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.

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.

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