Social Security reprieve fuels economic debate

  • Tuesday, November 27, 2001 9:00pm
  • Business

Associated Press

WASHINGTON — A one-month holiday from Social Security taxes for workers and employers was proposed Tuesday by Senate Republicans in a bid to increase pressure on Democrats to end a stalemate over legislation to energize the economy.

Republicans used procedural tactics to prevent Senate Majority Leader Tom Daschle from moving on to other legislation, insisting that the Senate first pass the stimulus package.

After a private meeting with GOP senators, Treasury Secretary Paul O’Neill reminded reporters that President Bush is adamant that the Senate act quickly.

"I hope we can give him an early Christmas present," O’Neill said.

Democrats say they are open to negotiations and would consider the Social Security tax holiday, but only if a $15 billion package of homeland security spending items be made part of the talks. Republicans have blocked a Democratic package including the items.

"We want everything on the table when we sit down," Daschle, D-S.D., said.

Bush planned to meet with congressional leaders Wednesday to urge an end to the deadlock.

A tax holiday, first suggested by Sen. Pete Domenici, would give workers and employers a one-month break from the 6.2 percent payroll tax that each pays into the Social Security Trust Fund. Self-employed people would get to keep the entire 12.4 percent for a month.

To prevent the already-threatened Social Security fund from losing money, the cost of the holiday — about $43 billion if done in January — would be replenished with a transfer from general tax revenues.

Domenici, R-N.M., said a worker earning $40,000 a year would keep $207 more in earnings; a self-employed contractor would see a $413 increase in pay. Employers would also get infusions of cash.

"I have not seen a stimulus package that is better," said Domenici, ranking Republican on the Budget Committee.

The holiday proposal, part of a revised $100 billion stimulus package outlined Tuesday by GOP leaders, would essentially replace rebate checks of up to $600 for lower-income workers that were part of earlier versions.

Otherwise, the GOP plan contains many familiar items: reduction of the 27 percent tax bracket to 25 percent in 2002, instead of waiting until 2006; repeal of the corporate alternative minimum tax; an immediate 20 percent business depreciation write-off for three years; a 13-week extension of unemployment benefits; and $5 billion in grants that states could use to help the jobless pay health insurance premiums.

There were no signs that the latest GOP offer would bring Democrats and Republicans closer to a deal. In fact, the two sides spent much of Tuesday trading shots over which was being obstructionist.

House Ways and Means Committee chairman Bill Thomas, R-Calif., told reporters that Democratic insistence on attaching the homeland security spending to the stimulus plan is designed to ensure that nothing passes.

"It is the Senate that has failed," Thomas said. "Either Daschle can’t lead, or he isn’t willing to lead, and the end result is the same: failure."

Daschle challenged Republicans to identify which items they specifically oppose, such as more vaccines to combat bioterrorism, nuclear plant security and border security.

"The homeland security bill is a direct response to the tragedy of Sept. 11," he said.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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