Senate Passes Temporary Extension Of Payroll Tax Cut

Apparently unable to reach a long term agreement, the Senate today passed an extension of the payroll tax cut that does nothing but kick this issue down the road about 45 days at the most:

The Senate on Saturday morning approved a two-month extension of a payroll tax break and jobless benefits, easily passing a year-end legislative package that also forces President Barack Obama to make a controversial decision on a major oil pipeline in the thick of his reelection campaign.

By an 89-10 vote, senators approved the plan as part of a final round of action that will conclude an acrimonious year of legislating in the divided Congress. Seven Republicans, one independent and two Democrats voted against the plan. The House is expected to take up the proposal in the coming days, where some top Republicans have voiced concern about a short-term extension.

The vote came moments after Senate Majority Leader Harry Reid (D-Nev.) conceded that senators did not have an official cost estimate of the plan, an admission that served to underscore the frantic nature of the talks and the much-criticized legislative process employed by this Congress. The Congressional Budget Office later said it would reduce the deficit by $3 billion over the next decade.

Extending the 4.2 percent payroll tax holiday is one of Obama’s top priorities because it would ensure many families don’t pay on average an extra $1,000 a year in taxes next year. The proposal also would avert a scheduled 27 percent pay decrease for physicians serving Medicare patients, extend jobless benefits for millions of Americans and a welfare program. They will be paid for by new fees on the mortgage giants Fannie Mae and Freddie Mac.

The two-month extension of the payroll tax holiday would cost the government $20.4 billion in lost revenue; unemployment benefits costs $8.3 billion; and the so-called “doc fix” costs $4.1 billion. The new Fannie and Freddie fees cut the deficit by $35.7 billion.

The provisions are slated to expire on Feb. 29, ensuring that Congress will fight again over these programs after it returns from its scheduled holiday recess.

“Getting two months is a lot better than zero which is what some people in here wanted,” said Sen. Bob Casey (D-Pa.), gesturing at the Senate chamber.

Not everyone was happy.

Sen. Joe Manchin (D-W.Va.), who voted against the plan, said he was “furious and disgusted” at the two-month extension, saying the Social Security trust fund shouldn’t be used to pay for the break and that punting a problem for another two months is emblematic of Washington’s inability to solve tough problems.

“I think we’re robbing Peter to pay Paul, and we don’t have any money to pay Peter back,” said Sen. Orrin Hatch (R-Utah). “And that bothers me a lot.”

Manchin and others have a point about the fiscal stupidity of continuing to cut the FICA tax pretending that it’s economically stimulative (there really hasn’t been a lot of evidence that it has been over the past year), but politically both parties were backed into a corner here. Not extending this tax cut, and the unemployment benefits, right before Christmas would have looked bad. Of course, extending this out to the end of February doesn’t really accomplish anything other than guarantee we’ll go through this debate again in a month and half or so, but does anyone really doubt that they won’t extend this tax cut in an election year?

FILED UNDER: 2012 Election, Congress, Deficit and Debt, Taxes, US Politics, , , , , , , , , , , , , , , , ,
Doug Mataconis
About Doug Mataconis
Doug Mataconis held a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020. He passed far too young in July 2021.


  1. Again, why must the payroll tax cut extensions be “paid for”, but not the Bush tax cuts?

  2. Curtis says:

    The only things that need to be paid for are things Republicans don’t like. If they like it, they concoct an economic theory to prove that it doesn’t cost anything. If they don’t like a proposal, they can’t take it on directly, so they just say that spending is out of control and the deficit is too big.

    To be fair, there has been instances of this behavior on the other side, just not as pervasively.

    This has been the game plan for 30 plus years, so I don’t know why you’d be surprised now.

  3. eric_d78 says:

    And people still wonder why deficit goes up (as % of GDP) during Republican administrations while going down during Democratic Administration.

  4. Hello World! says:

    @eric_d78: Unfortunately i am not sure people wonder that. Any time i bring that point up my Republican friends just give me a blank stare.

  5. Hey Norm says:

    It warrants repeating…Republicans are uninterested in, and incapable of, governing.

  6. Funny thing is, Norm, that it was the House GOP that passed a full one-year extension of the Payroll Tax cut. Harry Reid refused to take it up in the Senate

  7. Hey Norm says:

    But why did Reid refuse to take it up?

  8. Ask him, Norm