Dem leaders announce support for extended payroll-tax holiday

Despite warnings it will undermine Social Security, House Democratic leaders are lining up behind a White House proposal to extend a payroll-tax cut beyond this year.

Reps. James Clyburn (D-S.C.) and John Larson (D-Conn.) announced Friday that they'll throw their weight behind the extended payroll-tax holiday, which President Obama and some leading Senate Democrats are prescribing as an economic stimulant.

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"Extending the payroll tax cut for another year will help keep our fragile economic recovery moving forward, create jobs and improve our long-term fiscal outlook," Clyburn, the No. 3 House Democrat, has written in a column to be published Tuesday on the website of the nonprofit Blue Dog Research Forum.

"Allowing this tax holiday to expire would take money out of the pockets of workers in a time of lingering uncertainty, putting the brakes on the economy at a time when we can ill afford it."

Larson, the chairman of the Democratic Caucus, agrees, spokesman Ellis Brachman told The Hill on Friday.

"He believes it will ultimately help consumers and the economy," Brachman wrote in an email.

The comments indicate growing momentum behind the push to extend the payroll-tax holiday, which was initially crafted by the White House and Senate Republicans as part of a December deal to continue the George W. Bush tax cuts for all Americans. The provision — which has slashed workers' payroll taxes by 32 percent on 2011 wages — is scheduled to expire at the end of the year.

A number of liberal Democrats had fought the initial tax cut, noting that the payroll tax is the sole funding stream for Social Security, which is already paying out more than it's taking in. Behind Rep. Lloyd Doggett (D-Texas), the lawmakers are now continuing that campaign in the face of a proposed extension.

Earlier this month, Doggett, Ted Deutch (Fla.) and Mark Critz (Pa.) urged their Democratic colleagues to oppose any additional payroll-tax breaks. The lawmakers warned that such measures threaten Social Security's ability to pay future benefits and defy the initial design of the program.

"Similar to how a company isolates its pension fund from its general operating account, the Social Security Trust Fund stands alone and does not have to compete with other government programs and priorities for funding," the Democrats explained.

"President Franklin Roosevelt famously said, 'We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my Social Security program.' "

Other leading Democrats are keeping their cards closer to their chests. The offices of House Minority Leader Nancy Pelosi (D-Calif.) and Steny Hoyer (D-Md.) did not respond to requests for comment this week.

Obama on Wednesday renewed his push to extend the payroll-tax cut as a way to stimulate an economy where unemployment remains above 9 percent.

"The American people need to know that we’re focused on jobs and not just on deficit reduction," Obama said during a press conference at the White House. "I think they want to have some confidence that we’ve got a plan that’s helping right now."

To make his case, Obama touted the economic benefits of the existing payroll-tax break, arguing "the American people have an extra thousand dollars, on average, in their pockets."

"That has helped cushion some of the tough stuff that happened in the first six months of this year, including the effects on oil prices as a consequence of what happened in the Middle East, as well as what happened in Japan," Obama said.

Under current law, workers this year have seen their payroll taxes cut from 6.2 to 4.2 percent. The Congressional Budget Office estimates the provision will reduce federal revenues by $112 billion over the next two years — money the government will have to borrow to fill the resulting hole in the Social Security trust fund.

The existing tax holiday applies only to workers, but Obama has floated the idea of extending it to employers as well.

In the upper chamber, Sen. Charles Schumer (D-N.Y.) is urging similar changes.