The White House cautioned on Monday that the average American family would pay $2,200 more in taxes in 2013 unless Congress acts in time to avoid tax increases and massive spending cuts set to take effect in January.
The administration's report from the Council of Economic Advisers and National Economic Council concluded that the nation's economic growth would slip 1.4 percentage points and consumer spending would drop $200 billion next year if leaders fail to act.
The report, in line with similar studies done by other institutions, is intended to pressure congressional Republicans who are resisting President Obama's efforts to extend income tax cuts enacted under President George W. Bush for families earning less than $250,000 a year. Republicans want to extend the cuts for all income levels.
Obama built his successful re-election campaign on charges that Republicans were captive to the rich and out of touch with the middle class. His chief promise was to extend the middle-class tax cuts. But even while he is championing those income tax cuts, the White House's latest report did not mention that the president is willing to reverse course on another expiring tax break that would raise the taxes of virtually every working American: the payroll tax reduction.
Obama fought to extend the lower payroll tax last December. But that tax revenue is needed to shore up Social Security, and Republicans said they would oppose another extension. The new report highlights the benefit of the lower payroll tax -- it, along with other deductions, saved the average family $3,600 over the past four years -- but was silent on extending it.
"You noticed that did you?" quipped a senior Democratic congressional aide. "Right now, it seems like the only thing everybody agrees on is that the payroll tax break should go away. But everybody is kind of acting like it's not happening."
A higher payroll tax would cost a family earning $50,000 a year an additional $1,000 in taxes.
When asked whether an extension of the payroll tax cut would help the economy more than the Bush tax cuts, Obama's chief economist Alan Krueger replied, "I don't have a really good answer for you."
Administration officials said Monday that an extension of the payroll tax break would be part of any negotiation with Congress, but Treasury Secretary Timothy Geithner, the White House's lead negotiator, has publicly opposed extending it.
Republicans say they're not responsible for any delays in the negotiations over taxes and spending.
"Republicans have stepped out of our comfort zone. We've been clear about what we'll do and what we won't. And yet we remain at an impasse," said Senate Minority Leader Mitch McConnell, R-Ky. "It's time for the president to present a plan that rises above these reckless and radical voices on the hard left."
White House efforts to buoy consumer confidence during the holiday shopping season were met with skepticism by retailers,
"It is encouraging to see the administration's acknowledgement that retailers and their customers will be among the hardest hit if our elected officials fail to address ongoing economic uncertainty," said Matthew Shay, president and CEO of the National Retail Federation. "However, just kicking the can down the road by cherry-picking reforms only serves to reinforce the well-placed fears of American consumers and retailers that the status quo will once again rule the day."