President Obama flew to Manchester, New Hampshire, on Nov. 22 to highlight the need to extend the payroll tax break due to expire on Dec. 31, 2011.
Less than twenty four hours after the Joint Select Committee on Debt Reduction released a statement to confirm the bipartisan panel had been unable to agree on a plan to cut the budget deficit by $1.2 trillion over the next 10 years, President Barack Obama flew to New Hampshire to try and garner support for his proposal to extend the payroll tax cut. The measure was introduced in January 2011 to stimulate the economy and is due to expire on Dec. 31, 2011.
Mr. Obama, who was speaking at a high-school in Manchester, told his audience that a failure by Congress to renew this tax cut would be tantamount to increasing taxes by $1,000 a year. Indeed, instead of paying 6.2 percent of their income in Social Security contributions, families this year were only required to give up 4.2 percent of their earnings. The Tax Policy Center estimates that 121 million families will have saved around $934 in 2011. Mr. Obama is, in fact, hoping to lower the rate even further to 3.1 percent, which would translate into an additional $500 in disposable income. The cost of halving Social Security contributions has been put at $179 billion.
By emphasizing that a no vote would result in an actual tax increase, the president was obviously sending a clear message to the Republicans, although, in principle, the GOP is not adverse to extending the measure. Yet, they may insist on spending cuts in other areas as a precondition to supporting the proposal.
President Obama is also keen to extend the 53-week emergency unemployment benefits for the long-term unemployed, which are also due to expire on Dec. 31. At the moment, the jobless living in one of the 20 states hardest hit by the economic slowdown can receive assistance for up to 99 weeks. Without emergency support, the long-term unemployed would only be entitled to 26 weeks of state unemployment benefits plus 20 weeks of extended benefits at the most.
Mr. Obama had hoped that the six Democrats on the joint select committee would be able to include an extension to both the payroll tax break and the emergency unemployment compensation in the final bipartisan proposal. However, because the 12-member panel failed to reach an agreement, the president said he would give Congress “another chance” to do the right thing.
“We still have to give the economy the jolt that it needs,” Mr. Obama told his Manchester audience. His trip to New Hampshire coincided with the release by the Bureau of Economic Analysis of revised third-quarter growth figures. The data showed that the economy grew at a slower rate than first reported between July and September (2 percent vs. 2.5 percent).
Although the economy still expanded compared with the previous three months of this year, the revised figures highlight the need for further government intervention. The data may further bolster President Obama’s case for the extension of the payroll tax break.
