Obama pushes GOP on payroll tax hike

President Obama on Monday, said now is not the "time to step on the brakes," as he urged Republicans to extend a payroll tax cut that is set to expire soon.

President Obama took to White House briefing room Monday to press Republicans to agree to extend the Social Security payroll tax cut holiday, which is set to expire at the end of the year if no action is taken.

"It would spur spending, it would spur hiring, and it's the right things to do," he said.

Many congressional Republicans have signaled they are open to extending the tax cut - though they have balked at Democratic proposals to pay for it. Last week, Senate Democrats failed to get the 60 votes necessary to pass a bill that would have extended and expanded the cut and paid for it with a 3.25 percent tax on income in excess of $1 million.

Democrats see the payroll tax fight as a prime opportunity to cast themselves as fighting for the middle class while casting Republicans as doing the bidding of the wealthiest Americans. The Obama reelection team emailed supporters last week to argue the fight shows that "when [Republicans] say no tax hikes, they really mean millionaires and billionaires shouldn't pay more, ever -- even if that means your taxes go up."

Mr. Obama picked up that line of argument Monday.

"I know many Republicans have sworn an oath never to raise taxes as long as they live," he said. "How could it be the only time there's a catch is when it comes to raising taxes for middle class families?"

Immediately after the speech, White House spokesman Jay Carney revealed a new countdown clock just behind the White House podium.

"If Congress doesn't act, middle class taxes increase in: 26 days, 09 hours, 35 minutes," it said.

Democrats warn that if the payroll tax is not extended, a family making $50,000 per year would see a tax hike of $1,000. They say extending and expanding the cut would put an average of $1,500 into the pockets of 160 million Americans.

"There aren't many folks either in the middle class or those trying to get in the middle class who can afford to give up $1,000 - not right now," Mr. Obama said Monday. "That's why Congress must act."

Republicans have accused Democrats of playing politics with the issue and of pushing a bill that would pay for the tax cut in a way that would have a negative impact on job creation.

"In all likelihood, we will agree to continue the current payroll tax relief for another year, but we believe that it should be paid for," Senate Republican leader Mitch McConnell said last week.

Mr. Obama said Monday he was willing to work with Republicans to pay for an extension of the payroll tax holiday, though he also noted that Republicans have previously not worried about paying for tax cuts, including in the case of the Bush tax cuts for high earners. He said the extension could not be paid for through cuts in areas like education and innovation, saying he is not willing to "pay for the extension in a way that actually hurts the economy."

The bill put forth by Democrats last week would have cut the Social Security portion of the payroll tax for employees from 4.2 to 3.1 percent and cut employer payroll taxes from 6.2 percent to 3.1 percent. (The current payroll tax holiday lowered the employee payroll tax cut from 6.2 percent to 4.2 percent.) A separate bill from Senate Republicans would have extended the current 4.2 percent payroll tax level, paying for it mostly through cuts to the federal workforce and an extended pay freeze for federal workers. Neither bill included the portion of the payroll tax that goes to Medicare, which stands at 1.45 percent from both the employee and employer.

Both bills failed, with the failure of the GOP version of the bill showing that Republicans are not unified on the issue of whether to extend the tax cut.

Senate Democrats plan to push a new bill this week that would drop the employer expansion of the tax cut but keep the expanded employee-side tax cut at 3.1 percent, a Democratic aide tells CBS News. The proposal reduces the cost of the bill from $265 billion to about $180 billion. House Republicans are expected to release a proposal this week as well.

Mr. Obama also pressed lawmakers to extend unemployment insurance before going home for the holidays, calling it the "last line of defense between hardship and catastrophe."

"We are going through what is still an extraordinary time in this country and this economy," said Mr. Obama, who went on to say that the money unemployed Americans get from such insurance allows them to put gas in the tank so they can get their children to school. "We cannot play games with unemployment insurance when we still have an unemployment rate that is far too high."

He said that independent economists believe that both extending the payroll tax holiday and extending unemployment insurance would help the economy, and warned they would lower their growth forecast for the nation if Congress does not act.

"Keep your word to the American people, and don't raise taxes on them right now," Mr. Obama said. "Now's not the time to slam on the brakes, now's the time to step on the gas."

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