Payroll Tax Cut Deal Gets the Job Done—but Has Major Flaws

Payroll Tax Cut Deal Gets the Job Done—but Has Major Flaws

Payroll Tax Cut Deal Gets the Job Done—but Has Major Flaws

Congress has finally agreed to a deal to help the unemployed—but at the expense of federal workers and perhaps Social Security.


After weeks of laborious negotiations, Congress passed a $143 billion package today to extend a payroll tax cut and unemployment insurance through the end of this year. The payroll tax cut will provide the average household $1,000 this year, a valuable form of economic stimulus, and 5 million Americans will continue to receive unemployment benefits. Taken together, the two measures may boost economic growth by 1 to 1.5 percent of GDP this year.

Both measures were part of President Obama’s jobs plan announced last fall, and Republicans were initially opposed to both. In December, Tea Party legislators in particular raised strong resistance to the idea of extending the payroll tax cut (mainly, one presumes, simply because it’s something President Obama wanted). Congress ended up passing a two-month extension only, and this time around Republican leaders seemed eager to at least extract worrisome concessions from Democrats for a yes vote.

Looking at the final details of today’s package, they failed—with some rather troubling exceptions.

I noted earlier this week that the unemployed could be left out of a deal entirely, and there were also troubling reports that Republicans might otherwise insist on mandatory drug testing and mandatory GED programs for the unemployed. In the end, the GED provisions were scrapped and the drug testing was watered down to simply allowing states to drug test unemployed applicants, not requiring it, and only for those who lost their job due to a failed drug test already or work in an industry where drug tests occur regularly.

Advocates for the jobless were largely pleased with the deal. “The payroll tax compromise affirms the critical role of the federal unemployment insurance program, on which millions of Americans have relied since the recession began to search for jobs, support their families and contribute to their communities,” said Christine Owens of the National Employment Law Project. “Despite extreme efforts to dismantle this basic safety net and impose significant new barriers on unemployed workers, Congress has reached an agreement that recognizes the fundamental role of unemployment insurance in putting Americans back to work.”

Republicans insisted, however, that the unemployment extension be paid for by pension cuts for federal employees. This led several Maryland Democrats—notably Representatives Steny Hoyer and Chris Van Hollen, both members of the leadership team—to denounce the deal on the House floor this morning and vote against it. (Maryland has a high concentration of federal workers). “Nobody is targeted in this bill other than federal employees,” said Hoyer. “We ought to stop dissing them, we ought to stop demagoguing them, we ought to stop using ‘bureaucrat’ as an epithet.”

The strongest Democratic condemnation of the deal came from Senator Tom Harkin, who pledged to vote against it in a fiery Senate speech last night. His problem: the payroll tax cut slows down the revenue stream for the Social Security trust fund. The money will be replaced by money from the general taxation fund, but Harkin is still concerned this sets a precedent for raiding Social Security:

“I never thought I would live to see the day when a Democratic president and a Democratic vice president would agree to put Social Security in this kind of jeopardy,” Harkin said on the Senate floor Thursday evening. “Never did I imagine a Democratic president beginning the unraveling of Social Security.”

“It’s a devil’s deal,” he later added. “It’s a bad deal. There are better ways to accomplish these goals.”

“I choose my words carefully,” Harkin said. “Make no mistake about it, American people, make no mistake about it. This is the beginning of the end of the sanctity of Social Security.”

Harkin’s full speech can be seen here:


The package cleared the House this morning by a 293-132 vote, with 146 Republicans voting yes and forty-one Democrats voting no. It cleared the Senate 60-36.

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