As the White House looks for a political advantage on the payroll tax issue, lawmakers in both parties are conflicted about an extension of the break, which could add as much as $250 billion to budget deficits and undermine Social Security’s financing stream.
Addressing an enthusiastic crowd in a high school gymnasium here, the president mocked the GOP’s “party of tax cuts” label.
“A lot of them have sworn an oath — ‘We’re never going to raise taxes on anybody for as long as we live,’ ” he said, a reference to the anti-tax pledge designed by GOP activist Grover Norquist and signed by many Republicans. “But the question they’ll have to answer when they get back from Thanksgiving is this: Are they really willing to break their oath to never raise taxes, and raise taxes on the middle class just to play politics?”
House Speaker John A. Boehner (R-Ohio) said Tuesday that Republicans told Obama long ago that “they stand ready to have an honest and fruitful discussion with him regarding the payroll tax extension, and that invitation stands.” Meanwhile, he called on the president in a written statement to “dislodge” a variety of jobs bills that have passed the House but are now “stuck in the Democratic-controlled Senate.”
Obama’s sharp tone underscored how any hope for a bipartisan deal to reduce the national debt has fizzled into campaign politics. The issue could help Obama shield himself from Republicans’ charges that, in his quest to roll back the George W. Bush-era tax cuts, he would impose a historic tax increase on many Americans.
He was greeted here Tuesday by a scathing attack from Republican front-runner Mitt Romney, who aired a new 60-second ad that uses images from Obama’s 2008 campaign to accuse him of failed economic leadership.
The president’s reelection campaign described the ad as deceitful because it included a clip of Obama saying at a 2008 event, “If we keep talking about the economy, we’re going to lose.” The ad does not disclose that Obama was mocking a comment by an aide to his opponent, Sen. John McCain (R-Ariz.). Nevertheless, it serves as a preview of the GOP’s general-election playbook against a president seen as weak on the economy.
The political stakes soared this week after leaders of the supercommittee announced that they were unable to agree on a debt-reduction plan, setting the stage for a potentially nasty year-end battle over the payroll tax cut and emergency unemployment benefits. The panel had been negotiating over whether to extend those measures as part of a deal, and now their fate is unclear.
The payroll tax holiday was enacted last December as part of a deal between Obama and GOP lawmakers. In addition to extending the Bush-era tax cuts through 2012, the agreement reduced employees’ share of the Social Security payroll tax from 6.2 percent of earnings to 4.2 percent — leaving about $120 billion in the pockets of about 121 million families this year, according to the nonpartisan Tax Policy Center, which estimated the savings for the average family at about $900.
Republicans have not ruled out an extension, but they note that Obama vowed in September to cover the entire $447 billion cost of his jobs package, which he introduced that month, including $250 billion to extend and expand the payroll tax cut so it would not add to annual budget deficits.
Obama proposed to pay for the package by limiting the value of itemized deductions for wealthy Americans, an idea that has never found favor in Congress. The supercommittee talked about using the 10-year savings from ending the wars in Iraq and Afghanistan. But because that money was not going to be spent anyway, senior aides in both parties said the idea was seen as a gimmick that neither chamber would accept without the political cover of a larger deal.
Senate Democrats have offered a different proposal: a new 5.6 percent tax on income over $1 million a year. Last month, the Senate rejected a plan to enact Obama’s jobs package with this “millionaire’s tax.” But now, Senate Democrats are considering reviving it to pay for continuing the payroll tax holiday.
Until this week, senior tax aides in the House and the Senate have been deeply embroiled in the supercommittee talks and have had little time to focus on other matters. One Democratic aide close to the supercommittee said the payroll tax extension “does have to be paid for, but it will get done.”
Private economic-forecasting firms predict that allowing the tax cut and unemployment benefits to expire would take a big toll on economic growth next year — just in time for the election. Democrats argue that any GOP effort to block the tax extension, even if it cannot be paid for, should therefore be viewed with suspicion.
Obama’s speech was interrupted Tuesday by about 20 demonstrators affiliated with the Occupy Wall Street movement. The president quieted the crowd and seemed to welcome the chance to echo some of the populist themes.
“We are not going to have an America in which only a sliver of folks have opportunity. We’re going to have an America where everybody has opportunity,” he said.