President Obama today commended Congress for"just in the nick of time for the holidays," and preventing 160 million Americans from seeing a 2 percent tax hike on January 1.
However, the president said passing the tax cut extension in the current economy should be a "formality," and dnce Congress returns from its holiday break, Mr. Obama said, lawmakers should pass a full, one-year extension "without drama, without delay."
Extending the payroll tax cut will give Americans more money to spend, which will boost the economy, Mr. Obama said -- "a boost we very much need right now."
Had Congress failed to act, some 160 million Americans would have seen their payroll tax for Social Security rise from 4.2 percent to 6.2 percent (the 1.45 percent payroll tax for Medicare remains in tact). In addition to preventing the tax increase, the legislation passed Friday extends unemployment benefits and prevents doctors from taking a cut in Medicare payments.
House Republicans initially opposed the two-month extension passed in the Senate last week, arguing in favor of a full, one-year extension. But after taking a political beating for holding up the bill, they struck a deal on Thursday to accept the Senate bill with added language to benefit small businesses.
Congress now has two months to work out its differences, which largely come down to a disagreement over how to pay for the tax cut. Senate Majority Leader Harry Reid said today Congress will have to be "somewhat inventive" to reach a compromise.
Mr. Obama said, "This continues to be a make or break moment for the middle class in this country," and he expects Democrats and Republicans to "roll up our sleeves" to work together.
The president pointed out that the tax cut translates into an extra $40 per paycheck for a family making $50,000 a year. The White House launched an aggressive campaign using that piece of trivia to drum up public support for extending the tax cut, asking citizens in an email, "What Does $40 Mean to You?"
Thousands of people responded to the question, and Mr. Obama thanked people for weighing in.
"I think it takes courage to believe your voice makes a difference," Mr. Obama said. "You reminded people in this town what this debate and what all of our debates should be about -- it's about you, it's about your families."
Now that the two-month tax cut extension is signed into law, Mr. Obama will join his family in Hawaii for the holidays.