House Republicans Get It Right In Rejecting Senate’s Two-Month Payroll Tax Holiday
House Republicans are demanding immediate negotiations with the Senate over a longer extension of the tax holiday, but with the Senate having already adjourned for the holidays it seems unlikely that would happen. So, with this move, Republicans have pretty much guaranteed that the holiday will expire at the end of the year.
Which was the right call:
WASHINGTON—The House Tuesday rejected a plan backed by President Barack Obama that would have extended a 2-percent payroll tax cut for two months and bought time for talks on a full-year renewal.
Republicans controlling the chamber are instead demanding immediate negotiations with the Senate on a year-long plan.
If Congress doesn’t pass a bill by the end of the year, payroll taxes will go up for 160 million workers on Jan. 1. Almost 2 million people could lose unemployment benefits in January as well.
The House vote, 229-193, kicks the measure back to the Senate, where the bipartisan two-month measure passed on Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid, D-Nev., says he won’t allow bargaining until the House approves the Senate’s short-term measure.
The vote caps a partisan debate on Obama’s jobs agenda, which has featured numerous campaign-style appearances but little real bipartisan negotiation, other than Senate talks last week that produced the two-month extension.
Politically this was a tough decision to make. Raising taxes is never popular, especially when the news of a tax hike comes around holiday time, and this gives Obama another talking point with which to deflect criticism over the economy. Obama’s strategy is to campaign against a “do nothing” Congress, claiming that the economy would be better if only legislators had rubber-stamped his policies, and this feeds into that.
But the House Republicans are trying to be the adults in the room. Or, at least, more adult than the rest of the politicians. The payroll tax holiday comes at the expense of revenues for Social Security and Medicare. Any temporary tax relief now comes with a price tag that is tax hikes to make up for shortfalls in those programs later. With Social Security and Medicare already ticking time bombs, it makes no sense to exacerbate their fiscal problems in the name of a feel-good temporary tax break.
And the temporary nature of this policy is, in and of itself, likely offsetting any minor good from tax relief by creating enormous amounts of uncertainty in the hiring markets. Plus, it’s dumb policy to begin with. Nobody hires workers to get a temporary payroll tax break.
This was a bad policy choice when Obama first suggested it, and we’d do well to be rid of it. Forget negotiating with the Senate for a longer extension. Let it expire, and let’s move on to more important aspects of the nation’s business.
Tags: deficits, john boehner, national debt, payroll taxes
