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Obama gov't touts tax cut victory, rebuilding America blueprint

02-22-2012 09:33 BJT

WASHINGTON, Feb. 21 (Xinhua) -- The Obama administration on Tuesday claimed a long-awaited political victory of extending payroll tax cut and jobless benefits for the long-term unemployed, and urged Congress to take more steps in line with the government to boost exports and rebuild America.

U.S. President Barack Obama (C) and Vice President Joe Biden (L Front) attend an event
about the payroll tax cut and unemployment insurance at the White House in Washington
D.C., capital of the United States, Feb. 21, 2012. Obama on Tuesday welcomed an
agreement by Congress to extend payroll tax cut and unemployment insurance, calling
for continued bipartisanship to help the economy. (Xinhua/Zhang Jun)

FULL-YEAR DEAL

Both parties showed rare bipartisanship last week, and the GOP- led House of Representatives on Friday voted to pass the extension of the payroll tax cut and jobless benefits for the long-term unemployed for the rest of this year on an overwhelming vote of 293 to 132.

The Senate on Friday followed shortly afterward with a vote 60 to 36 vote.

"This tax cut makes a difference for a lot of families," Obama said at a Tuesday White House event marking the passage of the tax cuts. He was expected to sign the bill into law in coming days.

The agreement represents a victory for Obama and his fellow Democrats, who have argued that payroll tax cut for Americans could provide a boost to the nascent economic recovery. Republican lawmakers also have reason to welcome the deal, as it gets a politically troubling issue off the table.

The bill could avoid a payroll tax hike for Americans on March 1, renewing unemployment benefits for the long-term unemployed as well as averting a steep cut in Medicare doctors' fees.

Failure to extend the payroll tax holiday will reduce U.S. real gross domestic product (GDP) in 2012 by 0.4 percentage point, while not extending the unemployment benefits will translate into a 0.3 percentage point real GDP growth decrease this year, Moody's Analytics chief economist Mark Zandi wrote on his blog.

The payroll tax was first reduced from 6.2 percent to 4.2 percent in the beginning of 2011 at the request of Obama to bolster consumption and economic recovery. Obama and his fellow Democrats have fought hard to renew the tax cut to woo middle- class voters, triggering rounds of bitter partisan wrangling in recent months.

Payroll tax, or employment tax, was imposed by the U.S. federal government on both employees and employers to fund entitlement programs including Social Security and Medicare.

The two-percentage-point payroll tax cut fell short of Obama's goal of halving it to 3.1 percent put forward last year in his 447- billion-dollar jobs bill, which has been blocked by rival Republicans who insisted that new fiscal spending moves would add red ink to the federal government as the nation's total public debt has surpassed 15 trillion U.S. dollars.

The bill is also designed to wind down the program of extended federal jobless benefits approved by Congress during the recession. The bill caps the current maximum duration 99 weeks of jobless benefits to 73 weeks, depending on different states' jobless rates.

MIXED REACTION

In an presidential election year, the payroll tax and jobless benefits deal drew hyperbolic rhetoric from the rival parties.

With public approval rating for Congress at a record low, U.S. House Speaker John Boehner, the top GOP congressman, and his top GOP lieutenants said last week that they would not insist that the cost of the deal be offset with spending cuts elsewhere.

The passage of the 143-billion-dollar measure before this week' s congressional recess ended a contentious political fight, but sparked mixed reaction from Republicans and Democrats. Boehner and other GOP leaders used the bill to attack the economic policies of the Obama administration on Friday which marked the third anniversary of Obama's 787-billion-dollar stimulus plan.

The payroll tax and jobless benefits deal was an "economic relief bill," not a "growth bill," Boehner charged, adding that " the only reason the provisions at the core of this measure are even necessary is because the president's economic policies have failed."

"Today is the 3rd anniversary of the president's failed ' stimulus'bill, and it's yet another reminder that we need to change course and focus on pro-growth economic policies that help small businesses create jobs," noted Boehner.

Facing a struggling economy, the bill was the "important thing to do" to keep this economy growing, Steny Hoyer, the No. 2 Democratic congressman, said Friday on the House floor.

"We need to create more jobs, expand opportunities and make sure that the American Dream is alive for all working Americans," Hoyer added.

"More people spending more money means more businesses will be able to hire more workers, and the entire economy gets another boost just as the recovery is starting to gain some steam," Obama said Tuesday at the White House event flanked by middle-class Americans.

RECOVER, REBALANCE, REBUILD

In a campaign-style speech at a Boeing facility on Friday, Obama reiterated the administration's key message in his State of the Union delivered last month that manufacturing sector and exports were critical to U.S. job creation, and the world's largest economy should invest on key areas to secure long-term growth.

The passage of the bill of extending payroll tax cut and jobless benefits for the long-term unemployed was an "important short-term step to strengthen our economy," Obama told Boeing workers, adding that "America is a place where we can always do something to create new jobs, and new opportunities, and new manufacturing, and new security for the middle class."

"The payroll tax cut is just a start. If we want middle-class families to get ahead, we've got to deal with a set of economic challenges that existed even before this recession hit," stressed Obama, adding that the administration was poised to take new moves to create manufacturing jobs in the nation and fulfill the goal of doubling exports within five years.

In his State of the Union address in 2010, Obama announced the National Export Initiative with the goal of doubling U.S. exports in five years by 2014. White House figures revealed that U.S. exports in 2011 rose nearly 34 percent over the 2009 figure, exceeding 2.1 trillion dollars in total value.

In one of the administration's latest efforts to boost exports, U.S. Secretary of State Hillary Clinton on Tuesday announced that she would appoint the State Department's first chief economist, to promote U.S. competitiveness and job creation, at the first-ever Global Business Conference organized by the department.

"Supporting advanced manufacturing, increasing U.S. exports and attracting more investment to the United States" in a bid to create more jobs were also priorities of the U.S. Commerce Department, Commerce Secretary John Bryson said at the conference.

In this year's annual Economic Report of the President under the theme of "To recover, rebalance, and rebuild" sent to Congress on Friday, Obama's economic advisers stated that the federal government's major economic priorities include raising demand for U.S. goods and services in the short term to support ongoing recovery, improving the nation's fiscal sustainability in the medium and long run, as well as investing in education, innovation, research and infrastructure to build a stronger foundation for future development.

Editor:Wang Lingfei |Source: Xinhua

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