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Senate OKs payroll tax cut extension, spending package

By David Lightman, McClatchy Newspapers

WASHINGTON — The Senate on Saturday approved a measure to assure 160 million people that they’ll get a Social Security tax break for two more months. But the big vote was accompanied by misgivings because the badly fractured Congress once again couldn’t agree on longer-term economic aid.

The bill, passed in the Senate by a vote of 89-10, is expected to be taken up in the House of Representatives early this week.

The Senate, meeting in an unusual Saturday session so it could wrap up its 2011 business, also passed, 67-22, a $915 billion budget package that keeps the government funded through Sept. 30, 2012. President Barack Obama is expected to sign the legislation.

The day’s biggest controversy, though, involved the tax break package. It also included an extension of benefits for the long-term jobless and a continuation of current Medicare payments to physicians.

The plan, expected to cost about $33 billion over 10 years, will be funded by increases in lending fees charged by mortgage giants Fannie Mae and Freddie Mac.

Obama hailed the Senate action, saying, “At a time when so many Americans are working harder and harder just to keep up, the extra $1,000 or so that the average family would get from this tax cut makes a real difference when you’re trying to buy groceries or pay the bills, make a mortgage or make a repair.”

Despite the bipartisan vote, few lawmakers were pleased, and passage by the Republican-dominated House this week is no certainty.

Even if approved, the plan’s temporary nature assures that the turmoil that has roiled this Congress all year will continue when lawmakers return next month.

The White House — and Senate Republicans — wanted the programs extended for a year, but could not agree on how to pay for them.

“This makes no sense to do this for two months,” said Sen. Joe Manchin, D-W.Va. “We’re just going to come back and fight the same fight we’ve been fighting for months now.”

Even supporters were not enthusiastic, as they tried to explain that compromises inevitably disappoint nearly everyone.

“It’s not the bill I would have written,” said Senate Republican Leader Mitch McConnell of Kentucky. “It falls short in several respects, in not having certainty … the certainty issue is awfully important to the private sector if we’re going to come out of this economic slowdown.”

Senate Majority Leader Harry Reid of Nevada struck a similar chord.

“Ultimately, as hard as it is for the two of us, we on occasion have to do what we think is right for the good of the country,” Reid said.

But lawmakers on both sides saw potential for political gain as the fight resumes in the election year. Obama could position himself as a fighter for more tax cuts — and did just that Saturday.

He said it would be “inexcusable for Congress not to further extend this middle-class tax cut for the rest of the year. It should be a formality. And hopefully it’s done with as little drama as possible when they get back in January.”

Republicans argue that they, too, want lower taxes, but offer a more responsible way of paying for them.

GOP lawmakers have sought a federal pay freeze as one means of funding the breaks. Democrats sought a surtax on millionaires; many Republicans resisted raising taxes on anyone while the economy remains sluggish.

“It’s a fight we welcome,” said Sen. Charles Schumer, D-N.Y., particularly since spending issues have been resolved. “We were never on strong ground on spending issues,” he said, since GOP lawmakers have a reputation as bigger budget-cutters.

Other issues also promise to be flashpoints. To win GOP support, the bill includes an expedited review of the Keystone XL pipeline, a 1,700-mile project that would carry oil extracted from oil sands in western Canada to the U.S. Gulf Coast. The Obama administration delayed a final decision until 2013.

Environmentalists say extracting and producing the oil creates more greenhouse gases than conventional oil extraction.

Also likely to be debated is whether the payroll tax reduction is harming the Social Security trust fund.

“I hope after February we can resume financing Social Security the way its creators intended, not further driving it into the ditch,” said Sen. Mike Johanns, R-Neb.

The payroll tax will revert to 6.2 percent on employees Jan. 1 unless the legislation is passed. The legislation keeps the rate at its 2011 level of 4.2 percent.

The bill would also postpone a 27.4 percent reduction in payments to Medicare for physician services that’s scheduled to take effect Jan. 1. And it will allow certain extended jobless benefits — up to 99 weeks — to continue.

The budget bill also generated heated debate Saturday.

“We have 15 minutes to consider a bill 1,221 pages long,” Sen. John McCain, R-Ariz., complained.

The measure funds a wide range of federal programs, and incorporates many of the cuts lawmakers agreed to earlier this year.

The Department of Homeland Security, for instance, will get $39.6 billion from the bill, $2 billion less than last year and $4 billion less than Obama’s request. Federal Emergency Management Agency grants to first responders are among the cuts.

The bill also bars funds to transfer or release Guantanamo Bay detainees “to or within the United States or its territories,” or assist in such transfers.

Also cut were a number of labor and health and human services programs.

The Employment Training Administration will get $10.7 billion, $68 million below last year’s amount and $118.9 million less than Obama sought. The Low Income Home Energy Assistance Program, which helps poor people pay their utility bills, is due for $3.5 billion, $1.2 billion less than last year.

Some other programs will see increases — notably defense, up $5.1 billion to $518.1 billion, including a 1.6 percent military pay raise and more money for health programs for troops and their families.

©2011 the McClatchy Washington Bureau

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