Just one day after Congress’ “super committee,” charged with addressing the national debt, announced it would fail to develop a $1.2 trillion debt reduction plan by Nov. 23, President Barack Obama announced his new focus, challenges Congress to preserve payroll tax cuts . The tax is set to expire at the end of the year, and if it does, the President suggests that the nation will lose one of its biggest economy boosters.
Failed Debt Reduction Plan Sends Congress Scrambling
The debt committee, created months ago in an effort to find a solution to the national debt, delivered a major blow on Monday. The appointed members of the committee announced that they would not be able to agree on a debt reduction plan in time, due to differing opinions on tax cuts and entitlement programs. The inability of the 12-member panel to agree across party lines confirmed fears that politicians may not be able to make bipartisan efforts for the benefit of the nation.
As a result of the committee’s failure , $1 trillion in automatic spending cuts to certain defense and non-defense programs starting in 2013 will be underway, including some limited cuts to Medicare. On Monday, Obama announced his intent to veto efforts to block payroll tax cuts, in an effort to encourage lawmakers to continue working together toward reducing the national debt, while credit ratings agencies said the U.S. could face a downgrade if any attempts to stock the cuts are made.
However, with the panel falling apart, another issue has surfaced. Payroll taxes had been cut by 2 percent last year to add more money to workers’ paychecks. The payroll tax cuts are only temporary and are set to expire at the end of the year. Lawmakers had originally planned to incorporate an extension to the cuts in the debt committee’s debt reduction plan, but can no longer utilize this vehicle to complete their goal.
Obama Pushes Extended Payroll Tax Cuts to Aid National Debt
To ensure that the payroll tax cuts don’t fall by the wayside in the wake of the debt committee disappointment, Obama has started an initiative to encourage lawmakers to focus on maintaining the cuts.
Democrats carry the same focus as Obama, aiming to extend the tax break before its expiration date, as well as extending the jobless benefits that 1.8 million could lose in January alone. Republicans, while not against extending the tax break and jobless benefits, are expected to insist that additional spending cuts be included to offset the $168 billion cost.
Analysts have warned that losing the payroll tax cuts and jobless benefits could slow economic growth by up to 1.5 percentage points next year.
