Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Obama Says Congress ‘Must Act’ on Payroll Tax Cut Extension

President Barack Obama
President Barack Obama speaks on payroll tax cuts in Washington on Monday. Photographer: Mandel Ngan/AFP/Getty Images

Dec. 5 (Bloomberg) -- President Barack Obama said keeping a temporary cut in the payroll tax through next year is crucial to sustaining the recovery and criticized Republicans for resisting Democratic proposals to extend it.

The U.S. economy still faces headwinds, including the debt crisis in Europe, Obama said at the White House.

“Although the unemployment rate went down last month our recovery is still fragile,” Obama said. “Now’s the time to step on the gas.”

Obama and congressional Democrats have been seeking a path to keeping the payroll tax cut in place for 2012. Republicans have opposed proposals by the administration to raise taxes for the wealthiest Americans to offset lost revenue.

Senate Majority Leader Harry Reid is proposing a revised plan to continue a cut in the payroll tax deduction for employees. Reid would drop an accompanying payroll-tax cut for employers and impose a surtax on millionaires that would expire in 10 years.

The plan would reduce the payroll tax paid by employees to 3.1 percent from the current 4.2 percent. Eliminating the proposed tax cut for employers would shrink the cost of the package to about $180 billion over 10 years from $265 billion, according to a Democratic aide.

Reid is tweaking the Democratic measure in an attempt to win some Republican support and secure the 60 votes that would be needed to advance the legislation.

GDP Impact

Unless Congress acts, the current payroll tax cut -- which lowered the employee portion of the Social Security payroll tax from 6.2 percent to 4.2 percent for 2011 -- will expire on Dec. 31. Mark Zandi, the chief economist at Moody’s Analytics, has said failure to extend the payroll tax cut into 2012 could cause U.S. gross domestic product to shrink by at least 0.5 percentage point during 2012.

“This isn’t just a political fight,” Obama said. Without action by Congress, 160 million Americans would see their taxes rise at the start of the new year, he said.

The Labor Department said Dec. 2 that the nation’s jobless rate fell to 8.6 percent in November from 9 percent the month before after employers added 120,000 jobs and 315,000 Americans left the labor force. The rate was the lowest since March 2009.

Obama’s economic aides said last week that more needs to be done to accelerate the pace of hiring to make up for the more than 8 million jobs lost during the recession that started in December 2007 and ended more than a year later.

Obama will travel to Osawatomie, Kansas, tomorrow to give a speech on the economy. President Theodore Roosevelt, a Republican, visited Osawatomie calling for a “new nationalism” more than 100 years ago. Obama is seeking to capitalize on a connection with Roosevelt, who said then: “I stand for the square deal.”

The ideas that Roosevelt put forward “are very much at issue today and the president’s speech will encapsulate the debates we’ve been having this year,” White House press secretary Jay Carney said.

To contact the reporters on this story: Roger Runningen in Washington at; Margaret Talev in Washington at

To contact the editor responsible for this story: Mark Silva at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.