Obama Urges Congress to Prevent Payroll Tax Hike After Deficit Panel Failure

Nov. 22, 2011: President Obama gestures during a speech at Manchester High School Central in Manchester, N.H. (AP)

President Obama, after watching the deficit Super Committee collapse under the weight of partisan discord, on Tuesday urged Congress to prevent that failure from resulting in a payroll tax increase at the end of the year.

Some on the so-called Super Committee were hoping to include the payroll tax extension, along with an extension of unemployment aid, in a final agreement to cut the deficit by $1.2 trillion. The provision, passed last year, was one of Obama's signature policies and something he has pushed for as part of a larger jobs package that has yet to attract widespread support in Congress. Without a deficit deal, the future of the cut and numerous other provisions is unclear.

Obama, on a visit to Manchester, N.H., warned that taxes would go up by about $1,000 for the average family if Congress does not act.

"This payroll tax is set to expire at the end of next month. ... If we allow that to happen, if Congress refuses to act, then middle-class families are going to get hit with a tax increase at the worst possible time," Obama said. "We can't let that happen, not right now."

Obama wants to extend the payroll tax cut -- and then expand it to cut taxes by another $500 for the average working family. He said a vote on the measure is coming up next week in the Senate.

House Speaker John Boehner said in a written statement Tuesday afternoon that Republicans are ready to discuss the payroll provision.

"We told the president in September that we stand ready to have an honest and fruitful discussion with him regarding the payroll tax extension, and that invitation stands," Boehner said, while urging Obama to get behind other Republican-authored jobs bills which have passed in his chamber.

But without a deficit-cutting deal, it's unclear how the government would pay for the payroll tax cuts, which would eat away at the Social Security coffers. And ahead of his visit Tuesday to New Hampshire, home of the first-in-the-nation primary, the former New England governor who wants to challenge Obama in 2012 effectively blamed the president's policies for suffocating business in the first place.

"Your policies have failed," former Massachusetts Gov. Mitt Romney wrote in a letter running in three New Hampshire newspapers. "Far from bringing the crisis to an end, your policies have actively hindered economic recovery."

The president's trip comes one day after the official collapse of the special congressional deficit-reduction panel, which failed to reach a deal on $1.2 trillion in cuts.

Making the payroll tax cut the top post-Super Committee priority, the White House says a middle-class family making $50,000 a year would see its taxes rise by $1,000 if the payroll tax cuts are not extended.

Republicans aren't wholly opposed to the extension. In fact, party members sent the White House a letter in September stating that extension of the payroll tax cut is one element of Obama's $447 billion jobs bill where the two sides may be able to find common ground.

But some Republicans worry that the tax cut extension would undermine the solvency of Social Security, and others are opposed to any effort to pay for the renewal by taxing the wealthiest Americans.

Last year's cut in the 6.2 percent payroll tax, which raises money for Social Security, was accomplished with borrowed money. Obama said Tuesday that he wants Washington to extend the cuts "responsibly," by asking the wealthiest Americans to pay a "little bit more."

White House Press Secretary Jay Carney said Tuesday it would be "inconceivable" for Republicans in Congress to allow payroll taxes to rise next year.

A senior administration official said the president would not insist on the cuts being paid for immediately.

The 2 percent payroll tax cut expiring in December gave 121 million families a tax cut averaging $934 last year at a total cost of about $120 billion, according to the Tax Policy Center. Obama wants to cut the payroll tax by another percentage point for workers, at a total cost of $179 billion, and cut the employer share of the tax in half as well for most companies, which carries a $69 billion price tag.

The visit is marked by deep political overtones. The president won the state by 9 percentage points in the 2008 election, but recent Bloomberg polling shows Romney beating Obama by 10 percentage points in a hypothetical match-up. Romney has built his early GOP primary strategy in large part around New Hampshire.

Romney's print ads, in the form of an open letter, say the evidence on Obama's economic stewardship is "unequivocal" -- his policies have "fallen short even by the standards your own administration set for itself."

Romney claimed the 2009 stimulus bill was packed with special interests and went toward projects that "were far from 'shovel ready' or had absolutely nothing to do with creating jobs."

As a result, Romney wrote, "You placed a burden of debt on America that will take generations to repay and we got almost nothing in return." Romney also faulted the president for pursuing new regulations that created uncertainty in the business community and "snuffed out investment."

The payroll tax cut issue, though, could appeal to independent voters in low-tax New Hampshire.

With Republican candidates blanketing the state with an anti-Obama message ahead of the Jan. 10 primary, the president and his surrogates, including Vice President Joe Biden, are seeking to steal some of the spotlight for their economic message.

Carney on Tuesday also criticized Romney for a separate TV ad now running in New Hampshire. The ad includes a clip from the 2008 campaign in which Obama said, "If we keep talking about the economy, we're going to lose." However, Obama was quoting somebody from Sen. John McCain's presidential campaign -- something Romney's campaign acknowledged in its release on the ad.

Carney described the ad as an "unfortunate" way for Romney to kick off his campaign's TV ads.

The Associated Press contributed to this report.