The Obama administration is pressing the U.S. Congress to extend a temporary cut in taxes used to fund the federal retirement system known as Social Security. Chances for a full-year extension seemed to improve after Republican congressional leaders dropped a demand to offset reduced revenue with spending cuts.
With America’s fragile economic recovery appearing to gain momentum, U.S. President Barack Obama has a simple message: keep it going. “The last thing we need is for Washington to stand in the way of America’s comeback. First and foremost, that means Washington should not hike taxes on working Americans right now," he said.
The so-called payroll tax cut boosted the average family’s income by about a thousand dollars last year. But the measure expires at the end of this month unless Congress acts.
Democratic Senator Max Baucus says the stakes are high. “Extending this tax cut through the end of the year will save families real money, an average of $1,000. These families will spend this extra money at local businesses, pumping it through our economy," he said.
Monday, Republican House Speaker John Boehner relented on his party’s demand for spending reductions to compensate for reduced tax revenue. It remains to be seen whether rank-and-file Republican lawmakers will go along with the concession.
Republican Senator Orrin Hatch says the country cannot afford to loose sight of its dire debt situation. “The total public debt outstanding is over $15.3 trillion, larger than the size of our gross domestic product. A debt-to-GDP ratio above 100-percent is clearly unsustainable and puts us in the ranks of many European countries currently in a severe debt crisis," he said.
President Obama has said the payroll tax cut will end after this year. A prolonged cut would threaten Social Security’s long-term solvency, putting at risk the federal income provided to more than 50 million retirees.