Opinion: Government: The wrong criticisms of the Senate’s payroll tax bill
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This post has been updated, as indicated below.
After The Times’ editorial board blasted the House Republican majority for rejecting the Senate’s bipartisan payroll-tax compromise, several readers argued that a) the Senate’s two-month extension was bad policy; b) it wasn’t a compromise; and/or c) it threatened Social Security. All are accurate to some degree, but none are apt.
House Republicans have harped on the two-month issue, arguing that such a brief change in tax policy will be a nightmare for corporate payroll systems. That’s missing the point of the Senate’s action. A very large majority in the Senate wants to extend the lower payroll tax rate for a full year, but Republicans and Democrats are deeply divided over how to pay for it. So rather than letting the rate go back up Jan. 1, they voted to keep the lower rate in place for two months while they cast about for consensus on how to pay for a full year’s extension.
In other words, the Senate action preserved the status quo in anticipation of a full-year deal being reached early in 2012. It was non-disruptive. It wasn’t a new initiative to cut taxes for two months.
House Ways and Means Committee Chairman Dave Camp (R-Mich.) seemed to miss these point completely Thursday when he said a three-month extension would be better than a two-month extension. Hello, Mr. Chairman? No one wants a two-month extension. Not many people want a three-month extension. The common goal is a full year.
[Updated, 2:07 p.m. Dec. 22: The House GOP leadership agreed Thursday afternoon to support passage of a slightly modified version of the Senate bill. The Senate, in turn, agreed to appoint conferees to negotiate a full-year extention with the House.]
It’s also odd to hear conservatives argue that the Senate deal wasn’t a compromise. By definition, anything that passes the Senate in this Congress is a compromise between the two parties. And in this case, Senate Republicans did a very good job of extracting a huge concession for their counterparts in the House: The Senate bill requires the administration to approve the Keystone XL pipeline project within two months unless President Obama declares it to be contrary to the national interest. That’s a huge win for the GOP. If the pipeline is approved, they can claim credit for forcing the administration to stop dragging its feet. And if it’s rejected, Obama will have to defend the decision before the election, not after.
Finally, cutting payroll taxes temporarily might seem like a threat to Social Security, which is financed by the tax. But like the payroll tax cut that Congress enacted for 2011, the legislation to continue the tax cut in 2012 would require the federal government to make up the loss to the Social Security Trust Fund with money from the general fund.
Granted, that means more borrowing. And the longer Congress has to borrow money to replenish the Social Security Trust Fund, the more inclined it may be to reduce payouts from that fund. That’s why the temporary reduction in payroll taxes should stay temporary. At this point, though, it’s a stretch to argue that the proposed tax holiday is an assault on Social Security.
President Obama called for the payroll tax cut to be renewed back in August. Had House Republicans been serious about doing that, they wouldn’t have waited until a week before Congress was scheduled to adjourn for the year to pass a bill loaded down with partisan riders. Not only did they seek to mandate approval for the hotly contested Keystone XL project, they proposed to roll back a host of environmental rules and impose new requirements on state-run unemployment insurance programs. Most of those proposals were fiercely resisted by Democrats, just as virtually all Republicans flatly rejected the Democrats’ repeated calls to pay for the payroll tax cut with higher taxes on the wealthy. In a perfect world, Congress would meet all its deadlines and work out all its disagreements with ample time to spare. Unfortunately, we live in a world of incessant brinksmanship that begets legislating on a stop-gap basis. That’s what the Senate was doing, just as Congress has done repeatedly on its annual spending bills, extended unemployment benefits and countless other time-sensitive measures.
Senate Minority Leader Mitch McConnell (R-Ky.) has offered his House colleagues a way out of the corner they’ve painted themselves into. He’s suggested that they agree to a short-term extension and begin negotiating immediately with the Senate for a longer-term fix. That’s pretty much what the Senate had already called for. Nevertheless, the House should take his advice.
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-- Jon Healey
