Payroll Tax Cut, Unemployment Extension, and the Funding Debate

Democrats led by President Obama and Senator Harry Reid (D-NV) are pushing Senate and House Republicans to pass a key component of Obama's Jobs bill, the so-called payroll tax cut extension.  At first glance, it may seem absurd that Republicans are passing on the chance to lower taxes without being blocked by Democrats, but the real fight isn't over whether or not to extend the cuts, but how to fund them.
 With competing versions of the bill stuck in the Senate, Democrats are using the impasse as an opportunity so slam Republicans for not supporting the tax cut, accusing them of doing so because it benefits middle-class Americans rather than the rich, further inciting Obama's class-warfare theme.

On the surface, it seems like the universe has flipped or Congress is in another dimension.  Democrats proposing tax cuts that Republicans are against?  Well, not really.  The problem isn't the tax cuts, which would save working families around $1,000 a year according to Forbes, but rather how to fund them and the unemployment benefit extension Democrats attached to the bill.  The Democrat plan proposes increasing taxes on "the wealthy" to pay for the $175 billion of lost revenue from the tax cut.  Last year, the pay roll tax cut was taken out of Social Security taxes, lowering its funding and adding to an already out of control deficit.  The new plan, although it does solve the funding problem, is straight up socialism.  Raise taxes on the rich and give the revenue to the poor, but disguise it as a "tax cut" so we can make the GOP look bad.  If this isn't blatantly obvious socialist policy, I don't know what is.  Between the socialist tax cut and extending unemployment to 99 weeks (which would need still more funding, spending, and/or deficit) its no wonder Republicans are against the bill.

GOP lawmakers aren't doing much better, however.  The hypocracy wasn't lost on Speaker of the House John Boehner (R-OH), who urged fellow Congressional Republicans to ultimately support some form of the tax cut, reminding them that the Republican Party is the party of cutting taxes and lower spending.  Funding proposed by House Republicans mostly involved savings made from cuts to entitlement programs, obviously not going to pass in the Senate.  That led to a stalemate, with both side blaming the other for the gridlock and accusing each other of various political insults.

The bill and the debate surrounding it are wonderfully timed and themed pieces of legislation used as much as a campaign tool than as relief for workers.  Democrats and Obama get the opportunity to bash Republicans, painting them as the party of the rich who refuse to pass tax cuts on the middle class.  In addition to the usual class-warfare tactics, Democrats get a boost from providing hurting families with additional money with the tax relief and by being the caring party who pushed for unemployment extensions.

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Republicans responded today by drafting their own bill in the house in an attempt to counter the political maneuvering by the Obama administration.  The House bill passes the tax break and benefits extension, but ties in the Keystone XL oil pipeline from Canada, which Obama decided to put off deciding on until after the election, under pressure by environmentalists to deny the project and labor unions to approve it, both key constituencies of the Obama campaign.  Had Obama allowed construction to begin in the U.S. before the election, he would have lost the vote and millions of dollars in donations from environmental groups.  If he denies the pipeline now or in the future, not only does he lose union support, but he gets labeled a job killer and hurts his economic reputation, such as it is.  Keystone's inclusion in the bill angered top Democrats, who said it wouldn't pass the Senate and Obama promising to veto the bill.  House Republicans, however, plan to pass the bill and send it to their colleagues in the Senate, and afterwards immediately end the session to leave for the holiday.  This effectively sticks the Senate with the bill; in this case, its either the Republican bill or no bill, as Senate Dem's have no way of sending it back.  Not passing the bill would be a political nightmare; after campaigning so hard for the bill and promising over 150 million middle-class workers a tax relief, not passing the bill would amount to political suicide, making the lesser of two evil options to pass the Republican bill with its Keystone XL approval included.

This is how House Republicans hope their plan will work.  Democrats still refuse to pass any Republican sponsored version of the bill,  just as Republicans refuse to pass theirs.  The debate has the potential to keep Congressmen into the holiday break.  They must pass the payroll tax cut by Jan. 1, the day the former tax cut expires.  Its going to be an exciting December on the Hill.

Related articles

• US Senate Dems,GOP Block Each Others Payroll TaxCut Extension (forexlive.com)
• Republicans tie Keystone pipeline to payroll tax cuts (vancouversun.com)
• President Obama Threatens Veto Over Keystone XL Pipeline (crooksandliars.com)
• Get Rid of Congress Now Because They Can't Agree on Anything - They All Must Go (bonjupatten.com)