Congress Approves Payroll Tax ‘Holiday’ as NoVa Reps Walk Tightrope

February 17, 2012 6:12 pmBy: 
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Rep. Frank Wolf

Northern Virginia Congressional representatives walked a tightrope today, as Congress gave final passage to an extension of the payroll tax “holiday” in a measure that also postpones a cut in Medicare payments to doctors and — most sensitively for the D.C. area — requires new federal employees to contribute a larger percentage of their income towards their pensions.

Rep. Frank Wolf (R-Va.) voted against extending the measure, saying it would steal money from Social Security and add to the nation’s deficit. Wolf noted that the House Appropriations Committee – on which he serves – worked to cut $95 billion in spending in the 2011 and 2012 fiscal year appropriations bills and that all those savings would be undermined by this legislation, which adds $93 billion to the national deficit.

The measure was quickly approved by both houses of Congress, with many Republicans who had previously opposed it falling into line as they prepared to head out of town for a one-week recess.  Without Congressional action, millions of Americans would have seen their net pay decrease at the end of the month.

Wolf also opposed the measure because it requires new federal employees to contribute a larger percentage of their income towards their pensions. “This bill only asks for sacrifice from a small number of Americans,” Wolf said in a statement submitted in the Congressional Record.

Connolly

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Rep. Gerald Connolly

Congressman Gerry Connolly (D-Va.) also voted against the bill.

“I support the Medicare “Doc Fix” in this bill.  I support the payroll tax cut extension in this bill.  I support the extension of unemployment insurance to so many of our fellow Americans who have suffered in the Great Recession,” Connolly said on the House floor.  “Sadly, I cannot, however, bring myself to vote for this bill.”

“It is not fair to ask only one group of Americans – federal employees – to bear the burden of reducing the federal deficit.  Certainly, they must do their part, and they don’t object to sharing the sacrifice, but shared sacrifice should mean shared sacrifice,” Connolly said. “Federal employees have already contributed $60 billion toward reducing the deficit through successive years of pay freezes.  Now the Republican majority wants to increase the burden on their shoulders by raising their retirement contributions and, essentially, cutting their pay,” the Northern Virginia congressman said.

Consideration of the conference report, H.R. 3630, marked the second time this week that House Republicans have tried to cut federal retirement benefits, Connolly noted.  The transportation bill pending before the House, H.R. 3813, would force current federal employees to pay nearly 300 percent more in retirement costs and cut the FERS annuity supplement.  The bill would increase retirement contributions for new federal employees by 400 percent while reducing the benefit they receive by 40 percent.

Calling the anti-federal employee provisions in the payroll tax bill “outrageous,” Connolly said the legislation was one more attempt by the House majority to hollow out the federal workforce.  “They want to create an environment where nobody will be interested in federal service because the pay and benefits are so far below those in the private sector.”  About 47 percent of the federal workforce is expected to retire in the next decade.

Moran

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Rep. Moran

Democrat Jim Moran also opposed the measure. “Extending a tax cut for the middle class by taking from the paychecks of middle class federal workers is not fair, nor does make sense,” he said..

“Under this agreement, new federal employees will see a nearly 400 percent increase in their contributions to their retirement – without an increase in their benefits. Let me be clear: without a corresponding increase in benefits, a larger contribution is simply a pay cut.  By forgoing two years of pay raises, federal employees have already sacrificed more than $60 billion in lost income – the only constituency to have done so in the name of deficit reduction.

“This bill sends a signal to our federal workforce that we do not appreciate their hard work. In the next five years, nearly half of the federal workforce will be eligible for retirement. Only 6 percent of college graduates polled want to work for the government,” Moran said. “The Federal Government should be doing everything it can to boost recruitment and retention efforts. This conference agreement does just the opposite and therefore I can’t support it.”

No holiday

While most D.C.-area politicos emphasized their opposition to targeting federal workers, Wolf made no bones about it — he opposes the extension of the payroll tax, saying it increases the deficit.  He voted against the creation of the payroll holiday in 2010 and against extending it in 2011.

Below is the complete text of Wolf’s statement submitted in the Congressional Record.  It also is available on his Web site, wolf.house.gov.

Mr. Speaker, What are we doing? The bill before us today, which would extend the expiring payroll holiday for 10 more months, exemplifies all that is wrong with Washington. No wonder the American peoples’ faith in Congress is at an all-time low. 

First, the agreement steals $93 billion from the Social Security Trust Fund to pay for a 10-month extension of a temporary program that was supposed to expire two months ago. 

Second, there is no offset for this new spending.  It adds $93 billion to the deficit this year – money we will have to borrow from countries like China, which is spying on us, taking our jobs and has terrible record on human rights.   

Third, this bill only asks for sacrifice from a small number of Americans – federal employees and postal workers – to pay for the unemployment insurance extension and the Medicare “doc fix.”

Fourth, this “holiday” has proven to have little impact on economic growth and job creation, while significantly growing our deficit.

Finally, the House Appropriations Committee led efforts to cut $95 billion in spending in the 2011 and 2012 fiscal year appropriations bills.  This bill undoes all of the discretionary spending cuts achieved by the House in one fell swoop.  

As chairman of the Commerce-Justice-Science Appropriations subcommittee, I have cut $11 billion from the budgets of the Commerce and Justice departments since Republicans reclaimed the majority.  These were difficult cuts, but necessary to start reining in our unsustainable deficit and debt.  And they will be completely undone after today’s vote.

Have we already forgotten the debates over the deficit last year? 

A year ago, we hoped to consider $4 trillion in debt reduction under the Bowles-Simpson Commission and the “Gang of Six” proposals. By the summer, we were voting on the Budget Control Act, which established a supercommittee charged with finding an additional $1.2 trillion in savings over 10 years.  

Now, the White House and Congress are going in the other direction and choosing to spend away the $95 billion in deficit reduction actually achieved last year. 

This is shameful. The American people are right to be disappointed that the president and the Congress have walked away from every serious deficit reduction effort. They should be appalled that both sides have joined together to spend more money and weaken Social Security. 

This agreement is giving away the store.  And for what?  A payroll “holiday” that most Americans haven’t even noticed, according to a recent nationwide poll.

Our country is going broke. The national debt is over $15 trillion and is projected to reach $17 trillion by the end of this year and $21 trillion in 2021. We have annual deficits of over $1 trillion. We have unfunded obligations and liabilities of $65 trillion.  We are going the way of Greece.

Why are we voting to extend a policy that does nothing more than steal from the Social Security Trust Fund, which is already going broke? Social Security is unique because it is paid for through a dedicated tax on workers who will receive future benefits. The money paid today funds benefits for existing retirees, and ensures future benefits. Because you pay now, a future worker will pay your benefits. That is why, until December 2010, this revenue stream was considered sacrosanct by both political parties.

Social Security is already on an unsustainable path.  Today’s medical breakthroughs simply were not envisioned when the system was created in 1935. For example, in 1950, the average American lived for 68 years and 16 workers supported one retiree. Today, the average life expectancy is 78 and three workers support one retiree. Three and a half million people received Social Security in 1950; 55 million receive it today.

Every day since January 1, 2011, over 10,000 baby-boomers turned 65. This trend will continue every day for the next 19 years. Do these numbers sound sustainable to anyone?

The Social Security Actuary has said that by 2036 the trust fund will be unable to pay full benefits. This means that everyone will receive an across-the-board cut of 22 percent, regardless of how much money they paid into the system.

Does it make sense that everyone, regardless of income, will get money from this “stimulus?”  Does anyone think that Warren Buffet or Jimmy Buffet changed their buying habits as a result of this temporary suspension? 

Or did General Electric’s CEO, Jeffery Immelt, the head of President Obama’s Council on Jobs and Competitiveness who recently shipped GE’s medical imaging division from Wisconsin to China, really benefit from this “holiday?”  

We all know what needs to be done to address the deficit and debt and that is why I have supported every serious effort to resolve this crisis, including the Bowles-Simpson recommendations, the Ryan Budget, the “Gang of Six,” the “Cut, Cap and Balance” plan and the Budget Control Act.

I also was among the bipartisan group of 103 members of Congress who urged the supercommittee to “go big” and identify $4 trillion in savings.  I continue to work with my colleagues to advance the Bowles-Simpson report.  I voted for the Balanced Budget Amendment.  Since 2006, when George Bush was in office, I have introduced my bipartisan legislation, the SAFE Commission, multiple times in hopes of dealing with this problem.

While none of these solutions were perfect, they all took the necessary steps to rebuild and protect our economy. In order to solve this problem, everything must be on the table for consideration: all entitlement spending; all domestic discretionary spending, including defense spending; and tax reform, particularly changes to make the tax code more simple and fair and to end the practice of tax earmarks and loopholes that cost hundreds of billions of dollars annually. 

Some of the pay-fors in today’s bill could be better used to address our deficit, such as the profits from the spectrum auction. Another pay-for that was previously proposed, and signed into law last December, raised the rates that mortgage lenders can charge on Fannie Mae and Freddie Mac loans.  This 10 basis point increase makes a home loan more expensive for thousands of individuals looking to buy a house, while doing nothing to further reform these two lending entities.  But rather than putting these offsets to good use, we’re spending them away for a 10-month extension of this “holiday.” 

But the bill before us now is even worse than what was previously considered because the biggest portion, the $93 billion cost of the payroll holiday, is not being offset.  Once again, only a small segment of our society – federal employees and postal workers – are being used to pay for the other measures wrapped into this proposal.

While there are many federal employees in the Capital region, it is worth noting that more than 85 percent of the workforce is outside of Washington.  Eighty five percent.  More than 65 percent of all federal employees work in agencies that support our national defense capabilities as we continue to fight the War on Terror.

Has anyone fully considered the impact that this legislation will have on our ability to recruit qualified individuals to the CIA, the NSA, the National Reconnaissance Office and the National Counter Terrorism Center?

Or the impact it will have on the FBI, which has, since 9/11, disrupted scores of terrorist plots against our country?

Or the impact on our military, which is supported by federal employees every day on military bases across the Nation?

Or the impact on VA hospitals across the country, which are treating veterans from World War II to today?

Or the impact on the Border Patrol?

Or the impact on NASA, its astronauts, engineers and scientists? 

Or the impact on NIH, and other federal researchers, scientists and doctors?

Federal employees are currently working under President Obama’s two-year pay freeze as they do their part to address our deficit.  But to ask them to spend the rest of their careers paying for a 10 month policy?  That doesn’t make sense.  

Leadership from both parties has said that extending this payroll “holiday” is paramount.  I see what has happened.  We all know that the president has used the power of his bully pulpit to push for the policy.  Just look at the headline of this morning’s National Journal Daily: “Payroll Deal Hands Victory to Obama.”  But he missed the opportunity to support his own Bowles-Simpson Commission to seriously deal with the deficit.   

The fiscal tsunami that is coming demands that we make tough decisions.  Should laws be passed just because they are perceived as popular?  I regret that months have been spent on this flawed policy instead of tackling the difficult choices to address our nation’s massive unfunded spending obligations. 

There is never a convenient time to make hard decisions.  The longer we put off fixing the problem, the worse the medicine will be and the greater the number of Americans who will be hurt.  I understand that many feel they need help.  But, as many have said, “there’s no such thing as a free lunch.”

America is living on borrowed dollars and borrowed time. We must stop leaving piles of debt to our children and grandchildren.

We can’t afford this debt financed spending.  I voted no on this policy in 2010.  I voted no on this policy on December 13.  I voted no on December 20.  And I vote no today.

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