With a holiday weekend of Supercommittee Superfailure behind us, the finger pointing and political positioning will no doubt go on for some time to come. But there are deadlines looming for a number of housekeeping items, each with their own electoral implications. Two of these – extension of the current payroll tax cuts and unemployment benefits – seem to already be getting a fresh look as the end of the year approaches.
In the wake of the failure of the congressional “super committee” to agree on a 10-year plan to reduce federal deficits, lawmakers from both parties signaled limited willingness to compromise on more immediate economic issues headed their way before the year ends.
The Obama administration has asked Congress to extend payroll tax cuts set to expire at the end of the year, and also to renew unemployment benefits. The tax-cut extension could cost the Treasury an estimated $112 billion, but if it lapses American workers will see an immediate tax increase on Jan. 1 that would cost a typical family $1,000 per year.
Not everyone is on board, though, including Jon Kyl.
“The payroll tax holiday has not stimulated job creation. We do not think that is a great way to do it,” Kyl said on Fox News.
Kyl, who served on the supercommittee, said it didn’t make sense to impose a higher tax on those who create jobs, preempting the argument from Democrats that additional stimulus measures should be paid for by increasing the tax rate on wealthier Americans.
“I can’t believe that,” said Sen. Dick Durbin (D-Ill.), also on the program. “Now the Republicans are walking away from lower- and middle-income families because they don’t want to impose a small, small tax on the wealthiest people.”
That pairing of opinions sets up a fairly fundamental argument which will probably dominate the end of this session. Hard line fiscal conservatives can clearly make the argument coming from Kyl, who also went on to note that the payroll taxes in question go toward funding the Social Security system, so Democrats who claim to be so worried about funding it should support him. But the political implications are fairly obvious and troubling as well. In terms of the payroll tax, it will be difficult for Republicans entering a contentious campaign season to maintain opposition to a tax increase on job creators while tacitly approving a failure to act on the payroll issue which Democrats will easily be able to identify as an effective tax increase on the vast majority of workers at all income levels.
The unemployment extension debate will be a bit more complicated, but it still runs a high degree of risk. Given the disproportionately high number of unemployed and underemployed workers, a failure to extend benefits when a dearth of available jobs still exists plays into the “heartless austerity” meme. This is an argument which cuts across party lines and affects voters of all stripes.
The reality of this was put forward by – of all people – one of my senators, Chuck Schumer.
“The pressure on both parties to come together in the middle … is going to be stronger and stronger. Second, the Republican primaries will end; right now the Republican primary pushes the candidates and then their Senate and congressional supporters to the right.”
He added: “But once you get a nominee, they have to move to the middle.”
Video of that back and forth episode follows.
EDIT: A correction because Kyl stubbornly refuses to change his name to the spelling I’d rather use.