Who’s serious about extending the payroll-tax cut?

posted at 1:55 pm on February 13, 2012 by Ed Morrissey

Late last night, Politico reported that talks have broken down between Republicans and Democrats in the Senate over the extension of the payroll-tax cut for the full year, an outcome officially supported by both parties and the White House.  So what’s the problem?  Both sides want to be seen as the serious party on reform, ironically:

Talks appeared to turn sour late Sunday. Several GOP aides began portraying their Democratic counterparts as unserious, saying Baucus is being held back by President Barack Obama and Senate Majority Leader Harry Reid (D-Nev.).

A GOP aide familiar with the talks said Democrats have “walked back” offers, including allowing spectrum sales and higher co-pays for federal civilian pensions to pay for jobless benefits. Reid, according to several Republican aides, pushed for an increase in Transportation Security Administration fees.

“They are just not serious,” the Republican aide said, “which makes it hard to avoid the conclusion that they are trying to scuttle the negotiations to provoke a fake crisis for political gain.”

Several Democrats dismissed that characterization, saying Republicans were holding up a deal by refusing to negotiate seriously over taxes, demanding to cut Medicare and calling for unrelated policy riders.

“By anonymously leaking faulty information while talks are still going on, Republicans are yet again showing that they simply do not want to extend this tax cut for middle class families,” said Adam Jentleson, a spokesman for Reid. “Democrats will continue working to extend this middle class tax cut, and Republicans will rightfully get blamed if Americans see their taxes go up on March 1.”

So which side is really “serious” about payroll tax policy?  That’s actually a trick question, because the answer is none of them.  The payroll-tax holiday was from the beginning a sham, a means only to bolster a claim by Barack Obama to have passed middle-class tax cuts.  The problem with this particular tax cut is that it doesn’t actually cut a tax, at least in the strict sense.  It lowers the forced contribution made by taxpayers into the mandatory Social Security retirement fund, which means that if Social Security ran as an actual retirement fund (as Democrats insist it does), we’re actually just borrowing money now from our later retirement.  That’s not saving us any money at all, unless (as most Republicans insist) we won’t see that money anyway.

The ostensible purpose of the payroll-tax “holiday,” which started at the beginning of 2011, was to boost the economy by putting a few more dollars into the pockets of the middle class each week.  This worked exactly was well as Obama’s similar “Making Work Pay” tax cut in 2009 and the Bush tax rebate of 2008, which is to say, not at all.  Our level of growth in 2011 was slightly lower than in 2010 and about the same as the CBO projects for 2012, around 2.0% GDP growth — stagnation level.  The fact that it had no impact at all would lead serious policymakers to conclude that the harmful effects of creating even more of a deficit at SSA outweighs the literally zero positive impact of the tax holiday and end it.  Unfortunately, that would mean that all of the unserious policymakers in both parties would accuse the others of raising taxes on the middle class in the middle of an election year.

Congress needs to get serious about long-term, substantial tax reform, rather than the Cash-for-Clunkers economic policy of the Obama years.  The only serious approach to the payroll-tax holiday is to end it and admit it flopped.

Update: As if to prove the point, House Republican leadership just released this statement:

“We support the work of our conference negotiators and continue to support a responsible resolution that extends current payroll tax relief, reforms and extends unemployment insurance, and includes a Medicare ‘doc fix.’  Republicans have attempted to reach an agreement and negotiated in good faith for months, and we will continue to do so.  Unfortunately, to date, Democrats have refused virtually every spending cut proposed – insisting instead on job-threatening tax hikes on small business job creators – and with respect to the need for an extension of the payroll tax cut, time is running short.

“Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue regarding offsets, unemployment insurance, and the ‘doc fix.’  If Democrats continue to refuse to negotiate in good faith, Republicans may schedule this measure for House consideration later this week pending a conversation with our members.  Democrats’ refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don’t go up on middle class workers.

“This is not our first choice.  Our goal is to reach a responsible agreement in conference.  But in the face of the Democrats’ stonewalling and obstructionism, we are prepared to act to protect small businesses and our economy from the consequences of Washington Democrats’ political games.”

So now we’re supporting a payroll-tax cut that isn’t paid for at all, apparently not even by the new home buyers who found out a little late that they got stuck with the bill the last time around.  Great.


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So which side is really “serious” about payroll tax policy? That’s actually a trick question, because the answer is none of them.

Ed, I doubt anyone here would be fooled by that “trick” question any more…

Sad times.

Gatsu on February 13, 2012 at 1:58 PM

Yeah, the GOP leadership will be big talk….that’s all you’re going to do before you bow down and fold like usual.

search4truth on February 13, 2012 at 1:59 PM

I feel better
/

cmsinaz on February 13, 2012 at 2:02 PM

If I could just get 1% of what Harry Reid earns in bribes and kickbacks in one month, I would be a rich man.

NoDonkey on February 13, 2012 at 2:03 PM

Congressional GOP = liguini spine

davidk on February 13, 2012 at 2:04 PM

Who insisted on extending this thing for only two months?

forest on February 13, 2012 at 2:09 PM

The New GOP. Same as the Old GOP.

portlandon on February 13, 2012 at 2:13 PM

Democrats “walked back” offers?
Come on guys!
Quit it!
Your kidding!
Stop it!
Your pulling my leg!
Ohhhhhh! You want us to pull your finger?

KOOLAID2 on February 13, 2012 at 2:15 PM

It’s pretty clear to me that both sides in Congress are nothing but children, arguing and bickering about how they can best control the People.

I just hate ‘em all.

OhEssYouCowboys on February 13, 2012 at 2:16 PM

Who insisted on extending this thing for only two months?

forest on February 13, 2012 at 2:09 PM

Obama and the Dems. That way the issue would come back around during an election year and try to get the GOP to concede to higher income taxes on those making 200,000 or more (notice I didn’t say the “rich”).

Bitter Clinger on February 13, 2012 at 2:18 PM

We need to take these Dogs in DC…shave their butts…and teach them to “walk backwards”!

KOOLAID2 on February 13, 2012 at 2:18 PM

The problem with this particular tax cut is that it doesn’t actually cut a tax, at least in the strict sense.

If that is a tax, then Social Security is welfare. Cut the charade.

MNHawk on February 13, 2012 at 2:23 PM

It’ll all come out in the wash, when one of the glorious leaders of the GOP will utter the standard utterance:

We reached out to our friends across the aisle and arrived at our usual concession to their terms.

OhEssYouCowboys on February 13, 2012 at 2:23 PM

Don’t touch him!
He’s touching me!
No I’m not! I’m almost touching you!

SouthernGent on February 13, 2012 at 2:24 PM

Congress needs to get serious about long-term, substantial tax reform, rather than the Cash-for-Clunkers economic policy of the Obama years. The only serious approach to the payroll-tax holiday is to end it and admit it flopped.

So let’s get behind all the candidates who are part of the problem.

Notorious GOP on February 13, 2012 at 2:27 PM

Obama and the Dems. That way the issue would come back around during an election year and try to get the GOP to concede to higher income taxes on those making 200,000 or more (notice I didn’t say the “rich”).

Bitter Clinger on February 13, 2012 at 2:18 PM

More acurately, they wanted the issue for the State of the Union speech. Obama admonished the GOP during the speech about getting a full year extension done, while is was the DEM’s who fought the full year extension in the first place.

Obama and he Dem’s are shameless.

WisRich on February 13, 2012 at 2:30 PM

The GOP should up the ante and all for a permanent elimination of the SS tax. Call the Dems bluff.

On the other hand, each day I grow more convinced that only an economic collapse of epic proportion will change our “leaders” and the economic retards that elect them.

I’ve stopped contributing to my 401k and have instead been buying silver.

None of these damn fools are serious, none!

Charlemagne on February 13, 2012 at 2:32 PM

More acurately, they wanted the issue for the State of the Union speech. Obama admonished the GOP during the speech about getting a full year extension done, while is was the DEM’s who fought the full year extension in the first place.

Obama and he Dem’s are shameless.

WisRich on February 13, 2012 at 2:30 PM

Didn’t know that. Of course, I couldn’t bring myself to watch or listen to the SOTU. Can only take Obama in very small doses.

Bitter Clinger on February 13, 2012 at 2:34 PM

I really think Social Security is sunk. There’s no money in there – it’s all vouchers. I can save them all a heyul of a lot of time by simply throwing away social security as a bad idea.

I know *I* will never see it. So can I stop paying for that crap now?

Turtle317 on February 13, 2012 at 2:40 PM

The only serious approach to the payroll-tax holiday is to end it and admit it flopped.

I agree completely but don’t expect Congress to end a tax “cut” in an election year. Particularly a Congressional election year.

Happy Nomad on February 13, 2012 at 2:41 PM

I am disgusted with our government running huge deficits to spend too much on worthless programs that only benefit Obama’s reelection. I am tired of putting debt on the backs of my children and grandchildren. I even plan to ask my (Democrat) Senator at a townhall in 2 weeks why he can’t even get a budget passed in 1000+ days!

That being said, though, I’m not sure that Boehner and the House passing a full year payroll tax cut without offsets is all bad. Reid and Obama need the GOP to be the ‘bad’ guys who deny this to the “working middle class”; by passing it cleanly, it puts the ball back in the Senate’s court where we will see just who is being obstructionists. It takes away the PR win for Obama (except of course then he’ll say he wants to be responsible and pay for this…hmmm how can it be framed to get around that?). We all know that Social Security is in the red, and that it isn’t really a fully funded retirement program anyway. Next year when we have more conservatives in Congress (please God, I hope so), we can pass entitlement and budget reforms..

At the moment, I just want to get out of this election season with getting rid of Obama and THEN start the work cleaning up our government.

mathgal60 on February 13, 2012 at 2:49 PM

That’s Our Boner!!

Tim_CA on February 13, 2012 at 2:58 PM

On the other hand, each day I grow more convinced that only an economic collapse of epic proportion will change our “leaders” and the economic retards that elect them.

I’ve stopped contributing to my 401k and have instead been buying silver.

None of these damn fools are serious, none!

Charlemagne on February 13, 2012 at 2:32 PM

Why would economic retards, the ~50% who are on public dole, ever vote for a Republican again?

riddick on February 13, 2012 at 3:01 PM

It’s not a tax cut.

It’s not a tax cut.

It’s not a tax cut.

It is a reduction in the dues/contribution each worker pays to SSA.

Why is it the WORST thing they’ve done to workers? Because the amount of each worker’s SS check is determined by the amount of that worker’s contributions. Less contributions now – lower check amount later.

And when you bit-ch about it later, it will be way too late to do anything about it. But they can use the lower check amounts as “proof” that SS fund is not as bad as everybody says and therefore no “fix” is required.

Everybody is drinking the Kool-Aid on this one.

platypus on February 13, 2012 at 3:02 PM

Actually the proposal to extend the payroll tax holiday for the rest of the year is one I first saw IIRC from one of the bloggers on RedState. The idea is you can’t then be accused of raising taxes on the middle/working class.

Then you fight like hell about unemployment insurance extensions, the doc fix, etc., and make approval of Keystone XL a condition of any deal with the Dems.

ex Dem from Miami on February 13, 2012 at 3:07 PM

If lowering payroll taxes by 2% is good, just think what we could do if we stopped collecting them altogether. We could call it the “Social Security Privatization Act of 2012.”

CJ on February 13, 2012 at 3:10 PM

As someone says in every Star Wars film:

I’ve got a bad feeling about this.

Ladysmith CulchaVulcha on February 13, 2012 at 3:15 PM

GOP cave!!! didn’t see that coming. It’s amazing what an election year would do to these republicans!

Salahuddin on February 13, 2012 at 3:23 PM

SHUT IT DOWN!

GarandFan on February 13, 2012 at 3:35 PM

He did the right thing. Negotiations with Obama are designed to fail. He wanted the GOP to refuse the payroll tax cut extension. So they have taken away his talking points which is all he has left. They should do the same with the debt ceiling. Have some pro forma “negotiations” with the Dems, declare failure and extend the debt ceiling. Then excoriate Obama for his lack of leadership. The GOP played tough last year and lost a lot of voters. This year they should target Obama and Reid. Let the people know the reform they voted for in 2010 won’t arrive until those two are out.

breffnian on February 13, 2012 at 4:48 PM

The payroll-tax holiday was from the beginning a sham, a means only to bolster a claim by Barack Obama to have passed middle-class tax cuts.

And a little discussed fact is that the payroll tax cut helps those who make the maximum social security amount more than lower income taxpayers.

The 2% reduction applies to all wages no matter what the amount of Adjusted Gross Income was while the Making Work Pay credit was eliminated if AGI exceeded $95,000. So in 2010, someone making a million dollars not get the $400 Making Work Pay credit. In 2011 however, that person would get the 2% reduction on wages for a tax break of $2,136.

Seems to me this is tax breaks for the wealthy from the Obama administration

Ann on February 13, 2012 at 5:42 PM

OK, I’m confused – Why do they need offsets from the General Fund, when clearly Soc Security is an independently financed and administered program. Any decrease in revenues to the fund, should automatically decrease the payout at the other end. That’s how “Retirement Programs” work.

And with that in mind, I’m voting for CJ:

If lowering payroll taxes by 2% is good, just think what we could do if we stopped collecting them altogether. We could call it the “Social Security Privatization Act of 2012.”

CJ on February 13, 2012 at 3:10 PM

mdenis39 on February 13, 2012 at 7:05 PM

I just hate ‘em all.

OhEssYouCowboys on February 13, 2012 at 2:16 PM

Entirely sensible.

S. D. on February 13, 2012 at 8:26 PM

Why don’t you read the IRS interpretation of the payroll tax bill to get the full flavor of another “payback provision”.

http://www.irs.gov/newsroom/article/0,,id=251650,00.html

djaymick on February 13, 2012 at 10:36 PM