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US Government Shutdown Averted, but the Payroll Tax Fight Continues

Posted on the 22 December 2011 by Periscope @periscopepost
US government shutdown averted, but the payroll tax fight continues

Speaker of the House John Boehner. Photo credit: Talk Media News

Last week, the US government narrowly avoided a partial shutdown when Congress approved a $1 trillion spending bill at the eleventh hour, but the payroll tax fight that brought America to the brink of shutdown for the third time in a year rolls on.

Both Republicans and Democrats, as well as a majority of Americans, are in favour of extending the payroll tax cut extension, which is set to expire on January 1 and, if allowed to do so, would raise taxes from 4.2 percent to 6.2 percent on 160 million US workers. And in fact, the US Senate on Saturday approved a two-month stopgap extension of the tax, as well as of jobless benefits for the longer-term unemployed; but the Republican-controlled House vetoed the extension this week, on the grounds that House Republicans want to extend it for a full year right away.

Compromise was in the air at the weekend when Congress united to approve the spending bill – Senate Majority Leader Harry Reid, a Nevada Democrat, had previously indicated that he wouldn’t allow the spending bill vote to go forward if the two sides couldn’t agree on a payroll tax plan. But it seems that even now, with the paychecks of millions of Americans in the balance, President Barack Obama publicly laying the pressure on the House Republican leadership, and Christmas right around the corner, there is no resolution to this partisan grudge match in sight.

Why are they fighting? Both sides want the payroll tax extension – after all, it’s just good politics, especially in an election year – so what’s the beef? The Associated Press put together a handy explainer: Basically, Republicans and Democrats can’t agree on how to pay for the payroll tax. The Democrats want to impose a 1.9 percent surcharge on Americans making more than $1 million a year; the Republicans hate that idea, saying it’ll inhibit job creation. The Republicans want to make higher income seniors pay more for Medicare and bigger spending cuts; the Democrats rejected those ideas. So, the Senate, in approving the two-month extension, essentially put the decision off until February. But House Republicans, many of them the freshmen elected on the wave of Tea Party-fueled frustration that swept over the 2010 midterm elections, are tired of putting things off and tired of seeing their leaders cave to the Senate.

The Republicans are losing – to President Obama. “The GOP leaders have somehow managed the remarkable feat of being blamed for opposing a one-year extension of a tax holiday that they are surely going to pass. This is no easy double play,” complained The Wall Street Journal in a leading editorial. “Republicans have also achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter, although he’s spent most of his Presidency promoting tax increases and he would hit the economy with one of the largest tax increases ever in 2013. This should be impossible.” The Republicans have failed to put together a unified House and Senate strategy; they’ve also missed the point that extending the tax cut is a political, not economic exercise.

Boehner is losing. Speaker of the House John Boehner has, Washington Post columnist Dana Milbank said, lost the plot. Boehner had no problem with the two-month extension plan – until the Tea Party freshmen did. Aligning himself with the most conservative of his party in the House and standing with the voting down of the two-month extension, Boehner “proves anew that the old-school speaker is less a leader of his caucus than a servant of his radical backbenchers.”

The House did the right thing. Boehner was right to stand with his backbenchers and stop the Senate bill, which had serious “workability” issues, Phil Kerpen, vice president for policy for Americans for Prosperity, a conservative de-reuglation advocacy group, said at Politico’s Arena blog. Calling the Senate plan a “weak two-month punt attempt”, Kerpen said, “The House rightly rejected this political gimmick and is insisting on a conference committee based on their own bill, which is superior in many respects, including a full year extension of the payroll tax holiday, necessary reforms of unemployment insurance, and an extension of full business expensing, the most important pro-growth feature.”

Americans are disgusted with Congress. Whatever the outcome, Americans are fed up with Congress’s perpetual bickering and inability to get along for once. “It’s just another smack in our face for the working public. We just can’t get ahead,” Mike Pryor, a construction worker from Aurora, Ill., told the Associated Press. “It seems like everything that Congress is doing is always against us … I mean, I’m at a loss for words, and I just can’t understand it, why they have to keep arguing.” And just when you thought it’s couldn’t go any lower, Congress’s approval rating has hit an all time low – only 11 percent of Americans approve of the job that Congress is doing, according to a recent Gallup poll.

Congress’s approval rating has sunk to an all-time low of 11 percent.

It’s going to get worse. “The brinksmanship in Congress over a payroll tax-cut extension may end up looking like a quaint disagreement by next December, when lawmakers must grapple with a fiscal policy debate at least 25 times more costly,” declared Richard Rubin and Steven Sloan at Bloomberg. “Unless Congress acts by the end of 2012, income tax cuts will expire, automatic reductions in defense and domestic spending will start and the alternative minimum tax will ensnare millions more taxpayers. The same Congress that can’t find a way to extend the widely supported payroll tax cut beyond Dec. 31 will be seeking to bridge long-held ideological differences.” Leonard Burman, a former Treasury Department official, told them, “The prospects look bleak.”

More on Congressional bickering

  • Shutdown nears in payroll tax fight
  • Is Congress just broken?
  • Deadlock in ceiling debate persists
  • US risks credit downgrade in debt ceiling stalemate
  • Debt talks floundering, partisanship blamed

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