Economy Watch: House Postpones Payroll Tax Cut Vote

The Senate passed the payroll tax cut and dropped the bill in the House's lap. Homebuilder confidence is up for the third consecutive month, but it's still anemic. And the U.K. looks like it will decline a 31 billion euro loan request.

December 20, 2011
By Dees Stribling, Contributing Editor

The U.S. House of Representatives

The U.S. Senate passed a two-month extension of the payroll tax cut and unemployment benefits late last week by a lopsided 89-10, and then said adios to the other chamber, intent on a Christmas break. The House of Representatives was expected to vote on an extension on Monday — and very likely to reject it — but for the moment at least, the vote has been put off.

The rejection is still considered likely to come, though reportedly the House majority plans to vote on its own measure, which will be different from the Senate’s, and then call for a conference committee with the Senate to hammer out a final bill. That way, in the peculiar hall of mirrors that is Congress, a yes vote on Tuesday will actually be a no vote if the Senate, which is free to ignore the offer of the conference committee, insists on a take-it-or-leave-it approach.

At stake is the expiration of the payroll tax cut enacted early this year, which is slated to vanish on the last day of 2011, as well as the extension of unemployment benefits and a cut in payments to doctors under Medicare. With the deadline approaching, the issue has become a political football, not only between parties, but as part of a byzantine intramural quarrel among various members of the GOP, such Senate Republicans–who overwhelmingly voted for the temporary extension — and House Republicans, who seem to be switching positions on the merits of cutting taxes in this instance, and between House Republicans and their leadership as well, just to make things interesting.

Homebuilders Feel a Little Better

Homebuilder confidence, as estimated by the National Association of Home Builders/Wells Fargo Housing Market Index, edged up again in December to 21, according to the NAHB on Monday. That marks a third consecutive month in which builder confidence has improved, bringing the index to its highest point since May 2010.

The component gauging current sales conditions rose two points in December to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May 2008. That isn’t to say that the homebuilding industry is in a robustly confident state, since over 50 indicates that more builders view conditions as “good” than just “poor,” and that hasn’t been the case since before the housing bubble popped. Still, all the components of the index were up, indicating a small measure of optimism.

“While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months,” noted NAHB chief economist David Crowe in a statement. “[It] signifies a legitimate though slowly emerging upward trend.”

UK Says No More For the IMF

Meanwhile, in Europe, it looks like the U.K. is going to decline a request for a 30.9 billion euro ($40.2 billion) contribution to the International Monetary Fund that would go to bailing out euro-zone sovereign bonds and banks. Other members of the EU — other solvent members, that is — will probably pony up as much as 150 billion euros ($195.1 billion) for that purpose. Euro-zone leaders have even asked non-EU countries (the U.S., Russia, China) to contribute to the cause of euro-bonds and -banks, but mostly the reply has been crickets chirping.

Wall Street dropped on Monday, possibly worried by comments by European Central Bank President Mario Draghi that the bank isn’t going to be Santa Claus to the struggling members of the euro-zone. The unexpected demise of the dictator of North Korea might have jangled investor nerves a little as well, since Kim Jong Il decidedly counts as “the devil you know.” The Dow Jones Industrial Average lost 100.13 points, or 0.84 percent, while the S&P 500 declined 1.17 percent and the Nasdaq was down 1.26 percent.