US President Barack Obama (C) and Vice President Joe Biden (L Front) attend an event about the payroll tax cut and unemployment insurance at the White House in Washington D.C., capital of the United States, Feb. 21, 2012. Obama on Tuesday welcomed an agreement by Congress to extend payroll tax cut and unemployment insurance, calling for continued bipartisanship to help the economy. Photo:Xinhua
The Obama administration on Tuesday claimed a long-awaited political victory of extending payroll tax cut and jobless benefits for the long-term unemployed, and urged Congress to take more steps in line with the government to boost exports and rebuild America.
FULL-YEAR DEAL
Both parties showed rare bipartisanship last week, and the GOP- led House of Representatives on Friday voted to pass the extension of the payroll tax cut and jobless benefits for the long-term unemployed for the rest of this year on an overwhelming vote of 293 to 132.
The Senate on Friday followed shortly afterward with a vote 60 to 36 vote.
"This tax cut makes a difference for a lot of families," Obama said at a Tuesday White House event marking the passage of the tax cuts. He was expected to sign the bill into law in coming days.
The agreement represents a victory for Obama and his fellow Democrats, who have argued that payroll tax cut for Americans could provide a boost to the nascent economic recovery. Republican lawmakers also have reason to welcome the deal, as it gets a politically troubling issue off the table.
The bill could avoid a payroll tax hike for Americans on March 1, renewing unemployment benefits for the long-term unemployed as well as averting a steep cut in Medicare doctors' fees.
Failure to extend the payroll tax holiday will reduce US real gross domestic product (GDP) in 2012 by 0.4 percentage point, while not extending the unemployment benefits will translate into a 0.3 percentage point real GDP growth decrease this year, Moody's Analytics chief economist Mark Zandi wrote on his blog.
The payroll tax was first reduced from 6.2 percent to 4.2 percent in the beginning of 2011 at the request of Obama to bolster consumption and economic recovery. Obama and his fellow Democrats have fought hard to renew the tax cut to woo middle- class voters, triggering rounds of bitter partisan wrangling in recent months.
Payroll tax, or employment tax, was imposed by the US federal government on both employees and employers to fund entitlement programs including Social Security and Medicare.
The two-percentage-point payroll tax cut fell short of Obama's goal of halving it to 3.1 percent put forward last year in his 447- billion-dollar jobs bill, which has been blocked by rival Republicans who insisted that new fiscal spending moves would add red ink to the federal government as the nation's total public debt has surpassed 15 trillion US dollars.
The bill is also designed to wind down the program of extended federal jobless benefits approved by Congress during the recession. The bill caps the current maximum duration 99 weeks of jobless benefits to 73 weeks, depending on different states' jobless rates.