Social Security Unfix
Research for Online Investors

12/20/11

The House of Representatives is voting this morning to disapprove the Senate version to extend a payroll tax cut into 2012.  Like Paul Harvey used to say “Now for the Rest of the Story.”  The House passed a one-year extension of the 2% lower Social Security contribution last Saturday.

The House bill also extended unemployment benefits for the long-term unemployed for one year and postpones a 27% cut in Medicare reimbursement rates for two years.  This last one is the often referenced “Doc Fix.”

Doctor reimbursements in Medicare are budgeted at a low rate to make the program appear more solvent than it is.  Every year, the congress passes the so called “Doc Fix” to raise the rates 27%; else the nation would see a mass doctor exodus from treating the programs patients.

The House bill also included a provision the Executive Branch must approve the Keystone XL pipeline project within two months, or find it against the national interest.

The House bill would extend unemployment benefits to 79 weeks, rather than the present 99 weeks.  It would require any unemployed person without a high school diploma to seek a GED or equivalent and allow states to test applicants for unemployment benefits for illegal drug use.

The House bill would block the administration from introducing regulations to reduce pollution from industrial boilers and extend the business deduction for capital equipment purchases through 2012.

The House bill paid for the above expenses by freezing the pay for civilian federal workers (including congress) for three years and required an increase in pension contributions.  It would increase the fee Fannie Mae and Freddie Mac charge for mortgage insurance and increase Medicare premiums for high-income beneficiaries.  It would direct the administration to sell broadcast spectrum ($8 billion dollars), and cut funds available for healthcare overhaul law programs.

The House bill would require taxpayers to provide social security numbers for any dependents claimed for a “child tax credit.”  This would keep parents from claiming a child tax credit for non-citizens.

The House bill bars food stamps and unemployment benefits for wealthy individuals.  The price tag of the House bill is $180 billion dollars.

The Senate amended the House bill, deleting and changing the language in the House bill and sent it back to the House.  The Senate bill costs $33 billion.  It extends the Social Security contribution cut until Feb. 29.  It extends unemployment benefits for 99 weeks until Feb. 29.  The Senate bill includes the “Doc Fix” through Feb. 29 and the same requirement on the Administration to approve the Keystone XL pipeline or declare it not to serve the national interest.

The Senate version is paid for by a 0.1% increase in Fannie Mae, Freddie Mac and FHA mortgage insurance.

By disapproving the Senate version of the payroll tax bill, the House puts the ball back in the Senate’s court.  House and Senate leaders will appoint members to a conference committee that will reconcile the two bills passed by each respective chamber.  This reconciled bill will then be presented to each chamber for passage.

Harry Reid (D.-Nev.) is the Majority Leader of the Senate.  He has vowed not to appoint any members to a conference committee.  Is it a bluff?  We shall see in the next few days.  If he chooses not to negotiate with the House, then there will be no bill.

A small observation, what is wrong with spending Christmas in Washington?  Who among us would not take our work as a legislator seriously and be happy to work over the holidays?  It appears the biggest obstacle to the House plan is freezing congressional pay for three years.

The market is on a big run higher today.  We have climbed more than half the way up from yesterday’s close of 1205 to resistance at 1260.  Tomorrow will surely see the market consolidate today’s gains.  We will see if today is the beginning of a nice end of the year rally, or simply more range bound trading.

Quote:
Why don't you reform yourselves? That task would be sufficient enough.—Frederic Bastiat

John

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

MarketToday Archive

Back to Top