Payroll-Tax Impasse Sets Off Workers’ Bipartisan Wrath at U.S. Lawmakers

Troy Brook said it’s time to redeploy the forces mobilizing against Wall Street to focus on Congress’s logjam blocking the extension of a payroll-tax cut for 160 million people with jobs and emergency unemployment benefits for those without.

“We should stop marching on all those other cities and get together to march on one -- D.C.,” Brook, 30, a restaurant worker in downtown Chicago, said in an interview yesterday.

Deadlocked Republicans and Democratic lawmakers are holding the measures hostage in a fight over spending. Most Americans -- 58 percent -- want Congress to approve the extension, according to an Associated Press-GfK survey released today. Interviews around the nation yesterday showed divisions that mirrored those in Washington.

If lawmakers don’t approve the extension by Dec. 31, workers would pay 6.2 percent on the first $110,100 of wages, up from 4.2 percent this year. And if lawmakers don’t act, unemployment benefits would be limited to the 26 weeks that most states offer. The fight over the tax, which funds Social Security, is the latest to-the-brink dispute that has come to define Congress, and threatens for the third time this year to shut down the federal government.

Congress “should not and cannot” leave for a holiday break until it passes the measures, President Barack Obama said in Washington today. A failure “wouldn’t be good for the economy.”

‘Playing Games’

The fight has not cowed investors: Yields on benchmark 30- year Treasuries, a measure of the extra money investors demand to hold government debt, were 2.93 percent today, up from 2.90 yesterday, the lowest since Nov. 24.

Still, economists have warned the higher payroll levy might damage the economy by restricting consumer spending.

“They’re playing games and it kills the markets,” said Ken Rohr, 52, a senior associate at Bank of America Merrill Lynch (BAC) in Chicago. “And the average Joe is the one who suffers.”

Each party says it wants an extension; the question is how to pay for it. Democrats want increased revenue while Republicans say the costs should be covered by spending cuts. The version approved by the Republican-controlled U.S. House of Representatives attached a provision limiting unemployment benefits and promotes a Canadian oil pipeline.

‘Stupid Thing’

Jim Nyquist, 50, an accountant in Lansing, Michigan, said the tax must go up.

“Cutting back the payroll tax is the most stupid thing they could do with respect to Social Security, underfunded as it is,” he said in an interview at an area shopping mall.

Democrats and Republicans alike are interested only in re- election rather than sound policy, he said.

“I tend to blame the Democrats for everything but I think it is Republicans that have been stalling this situation,” said David Hayes, 56, a physician from Scottsdale, Arizona, as he shopped at a Phoenix OfficeMax. He says he strongly believes the tax cut should be extended.

“I think the Republicans are making a point of deficit reduction even though they are usually anti-tax,” added Hayes, who said he supports “armed resistance” and believes Arizona should secede from the United States.

‘It’s Disgusting’

Stephanie Cook, 55, who works for Northern Trust Corp. (NTRS) in Chicago said she objects to the pipeline amendment.

“I think it’s disgusting,” she said. “They’re playing games again. That has nothing to do with the payroll tax and that shouldn’t be allowed.”

When asked who’s to blame for the stalemate, Nona Fox, 67, a retiree and writer from East Lansing, Michigan, said, “Probably the Republican Party, but I’m disgusted with both parties. I’m disgusted with Congress in general.”

Mike Wilson, president of the Cincinnati Tea Party near West Chester, Ohio, the hometown of Republican U.S. House Speaker John Boehner, said his comrades are not looking for tax cuts and want federal spending controlled.

“It would be irresponsible at this point, given the deficit we face, to continue the payroll-tax cut without paying for it,” Wilson said in a telephone interview from Cincinnati.

At the downtown Chicago fast-food restaurant where Skyler Reinhardt works, workers have been circulating a petition to raise the minimum wage, currently $8.25 an hour. Reinhardt, 20, said the tax-cut dispute makes no sense.

“I know that things need to be paid for, but are they charging the right people?” Reinhardt asked.

State employee Pat Cruz shook her head.

“To me, they ought to lock these guys in a room and let them fight it out to see who wins,” said Cruz, 61, who lives in the suburb of Woodridge.

“I’m living from paycheck to paycheck, trying to make ends meet while these guys are lining their own pockets,” Cruz said as she scratched the coating off a lottery ticket.

To contact the reporter on this story: Timothy Jones in Chicago at tjones58@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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