There was a time—up until last night—when Republicans would not support a payroll tax cut in order to goose the economy.
The party swallowed it in last December’s agreement on the Bush tax rates, and so this year Americans were subject to a payroll tax rate of 4.2 percent instead of 6.2 percent. But in the ensuing months, most Republicans made it clear they wouldn’t support extending the payroll tax cut again because they felt it didn’t do enough and cost too much money. “I think that it is time we stop with putting these Band-Aids over huge chest wounds,” said Representative Allen West, a Tea Party favorite from Florida. Representative Paul Ryan called it “sugar-high” economics this summer, and added later that it “simply exacerbates our debt problems in my opinion.”
You may notice that these rationales are pretty thin. Saying that a payroll tax cut is a “sugar high” or a “Band-Aid” concedes the basic argument it will actually help the economy—and indeed, an analyst for Barclay’s said yesterday that allowing the payroll tax cut to expire would shave 1.5 percent off of GDP. The White House estimates that expiration would cost families an average of $1,000. And people who follow the Bush tax cut debates should guffaw every time they hear a Republican suddenly insist that tax cuts be paid for.
The real reason Republicans opposed the payroll tax cut, one must conclude, is that Obama was for it—he made it one of the top items on his agenda in recent months. The longstanding motivation of Congressional Republicans has been to deny the president any victories on any issue, and during a summer where austerity and deficit reduction was paramount, and where the Tea Party existed in a pre-Occupy vacuum of citizen activism, the Republican rationales of “we can’t pay for this” had a bit more mileage with the press and public at large. (In fact, the August debt ceiling deal mandated an end to the payroll tax cut).
But the focus now is back on income inequality, thanks largely to the Occupy movement, and Democrats in the White House and in Congress have also taken on a much more aggressive and combative approach on the economy. This inside/outside game appears to have actually been effective—last night, Senate Minority Leader Mitch McConnell announced a rare retreat for his party, and said it would actually accept a payroll tax cut extension: