Wednesday, December 21, 2011

The GOP's payroll tax fiasco

Believe it or not, even Rupert Murdoch's Wall Street Journal is criticizing House Republicans for their stance on the payroll tax cut compromise worked out in the Senate.

Of course, the paper, which is owned by the parent company of Fox News, is just unhappy about the political aspects of it, how this will affect their goal of getting Republicans elected in 2012:
GOP Senate leader Mitch McConnell famously said a year ago that his main task in the 112th Congress was to make sure that President Obama would not be re-elected. Given how he and House Speaker John Boehner have handled the payroll tax debate, we wonder if they might end up re-electing the President before the 2012 campaign even begins in earnest.

The GOP leaders have somehow managed the remarkable feat of being blamed for opposing a one-year extension of a tax holiday that they are surely going to pass. This is no easy double play.

Still, when even your own side is criticizing you (and make no mistake, the Wall Street Journal is just as much a propaganda organ for the Republican Party as Fox News), you know there's something wrong!
If Republicans didn't want to extend the payroll tax cut on the merits, then they should have put together a strategy and the arguments for defeating it and explained why.

But if they knew they would eventually pass it, as most of them surely believed, then they had one of two choices. Either pass it quickly and at least take some political credit for it.

Or agree on a strategy to get something in return for passing it, which would mean focusing on a couple of popular policies that would put Mr. Obama and Democrats on the political spot. They finally did that last week by attaching a provision that requires Mr. Obama to make a decision on the Keystone XL pipeline within 60 days, and the President grumbled but has agreed to sign it.

But now Republicans are drowning out that victory in the sounds of their circular firing squad. Already four GOP Senators have rejected the House position, and the political rout will only get worse.

I thought a couple of things here were particularly funny. The first is this:
Their first mistake was adopting the President's language that he is proposing a tax cut rather than calling it a temporary tax holiday. People will understand the difference—and discount the benefit.

Funny, but I'm pretty sure I never heard the Wall Street Journal call the Bush tax cuts, which were also scheduled to last for just a set period of time, a "temporary tax holiday." I wonder why not?

The other point is better made by TPM than me:
A mostly irrelevant side note to the Wall Street Journal editorial everyone’s talking about is that they don’t seem to know what policy they’re talking about.

“House Republicans yesterday voted down the Senate’s two-month extension of the two-percentage-point payroll tax holiday to 4.2% from 6.2%,” the editors wrote. “They say the short extension makes no economic sense, but then neither does a one-year extension. No employer is going to hire a worker based on such a small and temporary decrease in employment costs, as this year’s tax holiday has demonstrated.”

They seem to have their payroll tax cuts mixed up. The two percent holiday that’s been in effect for the past year, and the extension Congress is fighting about right now, are both to employees’ share of the Social Security FICA tax. The theory behind the policy is that by increasing worker take-home pay, the cut provides suffering consumers with additional purchasing power, and thus stimulates demand, which is exactly what this sluggish economy needs.

Earlier in the year, President Obama proposed broadening this tax cut to include the employer share of the Social Security FICA tax. That policy operates on the theory that reducing cost-per-employee will create the incentive for job creation. It’s a weaker theory — a lot of big employers are already sitting on a bunch of cash, but aren’t hiring because they don’t have enough customers (see above about demand). But this is what the Wall Street Journal’s editors seem to think has been going on all year — and they’re completely wrong.

You might be surprised that the Wall Street Journal got something this simple wrong, but if you think of them as the newspaper equivalent of Fox News, I'm sure you'll understand it.

PS. Note that this payroll tax cut does not affect the financial soundness of the Social Security Trust Fund. You hear that sometimes, but it's a complete lie, since the fund will get the same amount of money, either way.

The Democrats had proposed paying for it with a "millionaire surtax" - a small tax increase on that amount of a person's income which was above a million dollars a year (only on that part in excess of $1 million per year, note), and of course Republicans wouldn't stand for taxing the wealthy. But even the compromise made up the cost of this payroll tax cut to Social Security.

This would not weaken Social Security at all!

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