By Richard Rubin - Dec 21, 2011 4:15 AM GMT+0700
Dec. 20 (Bloomberg) -- U.S. House Speaker John Boehner of Ohio speaks at a news conference in Washington about today's House vote to block a two-month extension of an expiring payroll tax cut that had been approved by the Senate. In a 229-193 vote, the House requested formal negotiations with the Senate on an extension. Senate Democrats have said they won't discuss a House Republican-preferred year-long agreement until a short-term extension is completed. (Source: Bloomberg)
Dec. 20 (Bloomberg) -- U.S. House Majority Leader Eric Cantor of Virginia talks about today's move by the House to block a two-month extension of an expiring payroll tax cut that was approved by the Senate. In a 229-193 vote, the House requested formal negotiations with the Senate. Democratic leaders have said they won’t discuss a year-long agreement until the short-term deal is completed. Cantor speaks with Bloomberg's Peter Cook on Bloomberg Television's "Money Moves with Deirdre Bolton." (Source: Bloomberg)
Dec. 20 (Bloomberg) -- House Minority Whip Steny Hoyer, a Maryland Democrat, talks about the House's rejection of a two-month extension of an expiring payroll tax cut. Hoyer speaks with Peter Cook on Bloomberg Television's "Money Moves." (Source: Bloomberg)
U.S. President Barack Obama speaks during the daily briefing at the White House in Washington, D.C., on Dec. 20, 2011. Photographer: Andrew Harrer/Bloomberg
Take-home pay for 160 million Americans will decline in January unless President Barack Obama, House Speaker John Boehner or Senate Democratic leader Harry Reid give ground in their positions on extending a payroll tax cut.
Obama insisted today that the only path to continuing the tax break past its Dec. 31 expiration is for the House of Representatives to send him a two-month extension passed by the Senate. At the White House today, he blamed a “faction” of Republicans for blocking the bill by including extraneous issues.
Meanwhile, Boehner and the Republican-controlled House pressed ahead with their plan. The House voted 229-193 to reject the Senate bill and insist on a year-long extension of the tax cut. Boehner, an Ohio Republican, then chose eight House Republican negotiators and demanded the Senate name lawmakers to attend formal talks.
“There’s no reason we can’t do this,” Boehner said at a news conference.
Reid said he would refuse to negotiate on a longer-term extension of the tax cut and other expiring laws, and that he wouldn’t appoint negotiators until the two-month deal was complete. Democrats called on Republicans to relent and pass the Senate bill.
Congressional ‘Tantrum’
“What we are dealing with today is a legislative tantrum,” said Representative Earl Blumenauer, an Oregon Democrat.
Most lawmakers agree that the tax cut should be extended through 2012. They differ on how to cover the cost to the Treasury and on what other policy changes should accompany the extensions. Senate Democrats want to pay part of its cost with a surtax on income exceeding $1 million, which Republicans oppose, and House Republicans have voted to pay for the bill through such measures as freezing federal civilian pay.
Over the past two weeks, those disagreements have ballooned into a high-stakes partisan power struggle. Each party is preparing to blame the other if the tax cut expires and they begin discussing retroactive laws.
The impasse could hurt consumer spending and economic growth. If Congress can’t reach agreement, the 2-percentage- point payroll tax cut would expire Dec. 31 and workers’ paychecks would be reduced. Expanded unemployment benefits also would expire, and doctors would receive smaller Medicare reimbursements starting in January.
Republicans say there is still time to negotiate a deal.
Expiration Nearing
“Our economy is too weak and the American people have been struggling for far too long” for Congress to come up short of an agreement, said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee. “We have two weeks to find a solution.”
“You have said many times that Congress must do its work before taking vacation,” Boehner wrote in a letter to Obama today. “Because we agree, our negotiators and the House stand ready to work through the holidays. I ask you to call on the Senate to return to appoint negotiators so that we can provide the American people the economic certainty they need.”
A schedule announcement from the office of Majority Leader Eric Cantor said House members would recess, though negotiators and House leaders will be available to consider a conference.
The House negotiators are Representatives Kevin Brady of Texas, Camp, Renee Ellmers of North Carolina, Nan Hayworth of New York, Tom Price of Georgia, Tom Reed of New York, Fred Upton of Michigan and Greg Walden of Oregon.
Democrats maintain that the best way to provide certainty for businesses would be to pass the two-month extension and then work on the longer-term proposal.
‘Unconscionable’
In a statement issued after today’s vote, Reid of Nevada called the House action “unconscionable.”
“As the clock ticks towards a middle-class tax hike, I would implore Speaker Boehner to listen to the sensible Senate Republicans and courageous House Republicans who are calling on him to take the responsible path,” Reid he said.
Failure to enact the legislation would reduce economic growth by 1.5 percentage points in the first half of 2012, according to a forecast by Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The U.S. economy will grow at an average 1 percent annual pace in the first six months of the year should the tax cut lapse, or by 2.5 percent if it’s extended, Feroli said in a Dec. 16 note to clients.
House Republicans maintain that a two-month extension of the tax cut passed by the Senate 89-10 on Dec. 17 would fail to provide the certainty that businesses need and would cause administrative hassles for payroll providers and employers.
Social Security
A House-passed bill, which includes a year-long extension of the tax cut, cost $202.4 billion in forgone revenue. The payroll tax funds Social Security. The House bill also included spending cuts, such as a pay freeze for civilian federal employees and Medicare premium increases for high-income taxpayers.
The Senate’s $33 billion bill would require Obama to make a decision within 60 days on TransCanada Corp.’s Keystone XL oil pipeline. The bill’s cost is covered by raising the guarantee fees that Fannie Mae, Freddie Mac and the Federal Housing Administration charge to lenders for new mortgages.
To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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