By John Stang
In light of the house rejecting the senate’s 2 month extension of the payroll tax cut and, and other topics in the bill, many bloggers are offering opinions on what the congress should do next. First, the Wall Street Journal editorial staff wrote a blistering column against the house GOP. While the Wall Street Journal says that extending the payroll tax cut for 1 year or 2 months was not a good policy, and that the house members were in the right on this one; they had no strategy for countering attacks and that they should just cut their loses and pass it:
At this stage, Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly. Then go home and return in January with a united House-Senate strategy that forces Democrats to make specific policy choices that highlight the differences between the parties on spending, taxes and regulation. Wisconsin freshman Senator Ron Johnson has been floating a useful agenda for such a strategy. The alternative is more chaotic retreat and the return of all-Democratic rule.
Jennifer Rubin at the Washington Post agrees, extend it now and debate it later:
The GOP, if it has not the wherewithal to oppose a payroll tax reduction (When will Congress ever have the nerve to increase it and stem further hemorrhaging of funds available for Social Security? Why not cut the entire tax, according to the Democrats’ logic?), then cut a deal and come back to finish the work in 2012. If the Democrats want another 10 months of payroll tax relief, then Republicans should get something for that (e.g. more cuts, a definitive decision on the pipeline). Just not now. In January.
Others want the GOP to hold their ground and have the senate come back for a fight. The Heritage Foundation writes:
And this is where America finds itself. The House is in one corner. The President is in another. And Senators checked the box and hopped a flight home for the holidays instead of doing the people’s business and reaching a compromise. Though President Obama would like us to believe the onus is on the House, it’s the Senate that has dropped the ball. And for the sake of the American people, they should come back to Washington and get to work on reaching an agreement.
Dave Weigel at Slate believes the GOP has held out before and they’ll do it again:
Yes, the Republicans are coming off as intransigent. But Democrats want to re-elect the president, so they’ll ultimately give up a lot to extend a tax cut and unemployment benefits. In the meantime, Republicans can figure out what leverage they have to weaken the welfare state. Despite how it looks right now, it doesn’t make sense to doubt them. After all, they’ve had a lot of practice at this.
The National Review likes the House provisions and think its worth fighting:
By contrast, the House bill is paid for by, among other things, extending the federal pay freeze, reforming government-employee pensions, introducing modest means-testing to Medicare, and stepping up (sadly necessary) efforts to prevent millionaires and illegal immigrants from improperly receiving government checks. Such reforms should hardly be controversial, let alone a cause for which Senate Democrats are willing to make 170 million American taxpayers suffer.
The bill contains more conservative provisions as well, such as checking the devolution of unemployment insurance into de facto welfare, undoing onerous EPA regulations, and implementing a two-year Medicare “doc fix” partially offset by further defunding of Obamacare. But as Speaker Boehner implied in a letter to President Obama, there is room for negotiation on the contours of these provisions — if the Senate will appoint negotiators to join House Republicans in a conference committee, something they have so far been unwilling to do.
Finally, many wonder if the WSJ editorial board understands what their talking about. Talking Points Memo doesn’t think so:
They seem to have their payroll tax cuts mixed up. The two percent holiday that’s been in effect for the past year, and the extension Congress is fighting about right now, are both toemployees’ share of the Social Security FICA tax. The theory behind the policy is that by increasing worker take-home pay, the cut provides suffering consumers with additional purchasing power, and thus stimulates demand, which is exactly what this sluggish economy needs.
Earlier in the year, President Obama proposed broadening this tax cut to include the employershare of the Social Security FICA tax. That policy operates on the theory that reducing cost-per-employee will create the incentive for job creation. It’s a weaker theory — a lot of big employers are already sitting on a bunch of cash, but aren’t hiring because they don’t have enough customers (see above about demand). But this is what the Wall Street Journal’s editors seem to think has been going on all year — and they’re completely wrong.
In my opinion, the house should just extend the payroll tax cut for a year, which not much different than how other short term tax policy works. Two months is not ideal, but most businesses will see it as temporary. So if a deal is cut later, that should negate any effects the short term extension has. Plus, if the GOP does not extend the payroll tax, it will look really bad and seem like they are raising taxes. Basically, it gives Democrats an election issue to take advantage of.