Obama Says Failure to Extend Payroll Tax Cut Would Wound Economy

Feb. 11 (Bloomberg) -- President Barack Obama said, even with recent economic gains, Congress would put the recovery at risk if it fails to extend a payroll tax cut for workers set to expire at the end of this month.

With negotiators debating how to pay for the extension, Obama used his weekly radio and Internet address to pressure lawmakers working on a plan that would keep taxes from going up for 160 million Americans, extend unemployment benefits and prevent a drop in Medicare reimbursements to doctors.

“Now is not the time for self-inflicted wounds to our recovery,” Obama said. “Now is the time for common-sense action. And this tax cut is common-sense.”

Congress in December passed a two-month extension of the tax cut because it couldn’t agree on how to cover the $100 billion cost through 2012. Since then, the unemployment rate has dropped to a three-year low of 8.3 percent. Lawmakers aren’t scheduled to be in Washington the week of Feb. 20, and some have begun discussing the possibility of extending the measure for several months at a time.

Obama urged Americans to contact their representatives in Congress and urge them to extend the tax break, which he said would amount to about $1,000 for a household making $50,000 a year.

“Tell them not to manufacture another needless standoff or crisis,” Obama said. “Tell them not to stand in the way of the recovery.”

Republican Address

Governor Bob McDonnell of Virginia, in the Republican radio and Internet address, offered his party’s response to Obama’s fiscal 2013 budget in advance of its Feb. 13 release. McDonnell said the budget blueprint will stifle private sector job creation and expand social programs, adding to the national budget deficit. Fiscal 2013 begins Oct. 1.

“With no boldness or leadership or setting priorities, the Obama approach is simply more debt, more taxes and more blaming others,” McDonnell said. “It appears we’ll see a bloated budget that doubles down on the failed policies of the past.”

Obama’s budget projections are based on the assumption that Congress will pass the payroll tax break and accept the White House’s other policy recommendations, such as letting Bush-era tax cuts for families earning $250,000 or more expire, administration officials said. The budget forecasts a $901 billion deficit next year and it will also show a deficit of $1.33 trillion this year and include hundreds of billions of dollars in infrastructure spending.

McDonnell faulted Senate Democrats and Majority Leader Harry Reid of Nevada for failing to pass a budget in almost three years.

McDonnell cited the success of Republican governors nationwide, who, he said, “closed $65 billion in deficits the past two fiscal years alone.”

“At every level, governments should enact policies that ensure our private sector job creators, small business owners and entrepreneurs can compete against the world, create jobs and innovate,” McDonnell said. “Republican leaders in our state capitals are creating those opportunities for success and they are getting results.”

--Editors: Joe Sobczyk, Jim Rubin.

To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net

To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net