With rising gas prices, soaring apparel costs and increasing tuition costs, American consumers could use a break. Lately, disposable income and consumer confidence have been making modest gains, but there is still a lot of uncertainty that is keeping consumer’s wallets closed. So, I was happy to see that Congress voted today to extend the payroll tax cut. The measure passed in the House by 293-132, and cleared the Senate with a 60-36 vote.
This was a rare sign of bipartisanship in a chronically gridlocked Congress, but the measure didn’t pass without a few tweaks. Basically, on each worker’s first $110,100 in annual wages, the Social Security tax will remain at 4.2% rather than getting hiked up to 6.2%. It’s estimated that this $100 billion plan will put about an extra $1,000 in the pockets of the average family.
Republicans got their victory by eliminating a cut in Medicare-funded payments to doctors and extended payment rates through year-end. Democrats got to maintain the federal jobless benefits program through 2012, but there are measures in place to gradually decrease the maximum period from 99 weeks to 73 weeks. Also, if a recipient losses his/her job due to a failed drug test, they would be required to take an additional test to qualify for benefits.
In the end, most Congress members agree it was a fair trade, and I agree. Considering that consumption makes up over two-thirds of the U.S. economy, I’m on board for any provisions that increase the average American’s spending power.