Wednesday, December 21, 2011

Curmudgeon explains payroll tax stalemate

Here's the deal: The Republicans say they want to extend the payroll tax cut that President Obama sought and obtained for 2011. President Obama says he wants to extend the payroll tax cut. The Democrats say they also want to extend the payroll tax cut.

Naturally, therefore, the payroll tax cut stands on the verge of expiration since neither the Democrats nor the Republicans can agree on how to extend the tax cut -- and both want to blame the other more than they want to accomplish the stated goal.

The Republican-dominated House of Representatives passed a bill including a one-year extension of the payroll tax cut -- but it also contained things that the Democrats don't like, such as support for a pipeline to bring Canadian oil to Gulf Coast refineries. The Republicans pitch it as a "jobs" bill, because it would, allegedly, create 20,000 direct construction jobs and 100,000 related support jobs.

The Democrats don't like this. It's not that the Democrats like Arab oil better -- or even Venezuelan oil -- and they're certainly not mad at the Canadians. Shucks, everybody likes Canadians. But there is an obvious environmental risk in pumping crude oil across the United States. There is the risk of spillage and pollution. There is the risk of disruption of wildlife habitat and migration patterns. There is also the risk that Republicans might get credit for the pipeline.

So the Democratic-controlled Senate passed their own bill, extending the payroll tax cut for only two months. Then they adjourned.

This was an in-your-face, take-it-or-leave-it move. Closing up shop for the holidays avoids a House-Senate conference, at which compromise might inadvertently occur. And it's a win-win. If the Republicans refuse to take their deal, they are the heartless Scrooges who raised everyone's taxes at Christmas. If they take the deal, though, it sets up a March 1 expiration date for the payroll tax cut, and a brand new "crisis" right during the height of the primary season, so the Democrats can gain maximum leverage from the inevitable stories of Republican intransigence.

Oh, and benefits for long-term unemployed people -- the victims of this interminable recession -- will also expire if the Democrats and Republicans can't find common ground. (Both bills had provisions to extend these benefits, too.) Now the House has adjourned too. And common ground seems further away than ever.

You will hear much in the next couple of days about who "wins" and who "loses" in this latest artificial crisis. Let me simplify this for you: If you're a Democrat, you will think the Republicans look unreasonable. If you're a Republican, you will think the Democrats look unreasonable. But the only real losers will be those people whose paychecks will shrink, even if only a little bit, after the first of the year.

This "crisis" is even dumber than the budget ceiling crisis because, here, there is near unanimity about the supposed desire for a payroll tax extension.

At least the politicians claim to want a payroll tax cut extension.

But let me ask an heretical question: Exactly what was the payroll tax supposed to do?

I thought it was supposed to spur job creation because it would lighten the tax burden on employers. But the employers' tax burden -- the employers' contribution -- stayed the same. I suppose there was some benefit in lowering the overall withholding obligation on employers -- but did you see any stimulus in job production where you live? Have the numbers of unemployed really fallen? (Allow me to answer again: No, they didn't. This, of course, is why Congress is also supposedly agreed about the need to extend benefits for the long-term unemployed -- which they might as well make permanent since they aren't even proposing to do anything about employers who freely, openly and blatantly discriminate against those who haven't been working for any length of time.)

If the payroll tax is just another failed economic stimulus, could it be that both sides really want to kill it, but no one dares admit it?

No comments: