Workers will keep a little more of their money, and Republicans dodged an election hot potato, but whether Americans will see an extension of the payroll-tax cut as a win in the long term remains to be seen.
On Friday, the House and Senate overwhelmingly approved a $143 billion measure that extends the current payroll-tax cut through the end of the year. Without action, the tax that funds the Social Security program would have returned to 6.2 percent for workers.
The bill also allows up to 73 weeks of unemployment benefits in states with the high employment (63 weeks in the rest) and delays a planned 27 percent cut in payments to doctors for Medicare patients. Those provisions also will extend through the end of the year.
Certainly anyone receiving extra money in their paycheck, extended unemployment benefits or higher reimbursements for caring for elderly patients will appreciate the immediate benefits from the measure's passage.
U.S. Sen. Bob Casey, D-Pa., said Tuesday that, on average, Blair County workers would take home an addition $426 a year from the tax cut based on the average median salary of $25,566.
But there's no such thing as a free lunch or a freebie from the government. It's just a matter of who pays.
The employee portion of the Social Security tax was initially reduced to 4.2 percent in 2011 as a measure to try to boost the economy by allowing workers to take home hundreds of dollars over the course of the year. The tax cut was extended by two months in December and was extended for the rest of 2012 on Friday.
But there's a big difference between the new extension and the previous cut.
In 2011, Congress acted to reimburse the Social Security trust fund for the 2 percentage point loss in tax revenue with cuts in other areas. There have been dire warnings for years about the long-term viability of the Social Security trust fund.
This time rather than reducing other spending, the payroll-tax cut will be paid for with more deficit spending, a move that will come back to haunt Americans when it's time to pay that bill.
As Sen. Pat Toomey, R-Pa., said in statement: "Social Security's long-term finances and the federal government's deficit are already unsustainable, and the payroll-tax cut extension makes this fiscal problem worse."
While Toomey voted against the conference report, Casey and all members of Pennsylania's House delegation voted for the payroll-tax cut extension.
In the short term, the payroll-tax cut extension will help many families during these difficult fiscal times.
Let's just hope things that when it's time to pay the bill for these benefits, the nation is much stronger economically.
