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:
Republicans earlier this year dismissed an extension of the cut as a “sugar high” that would do little to create jobs, but Senate Minority Leader Mitch McConnell (R-Ky.) announced a shift in strategy on Tuesday, saying he would offer the GOP offset for extending the tax holiday.
“I think at the end of the day there’s a lot of sentiment in our conference, clearly a majority sentiment, for continuing the payroll tax relief that we enacted a year ago in these tough times,” McConnell said.
This is quite a turnaround—as recently as Sunday, Senator Jon Kyl of Arizona, the number-two Republican in the Senate, was saying no to the payroll tax cut extension.
But the headwinds for Republicans have suddenly become much stronger. Again, the Occupy protests have, in many ways quantifiable and not, pushed the mainstream discussion towards a focus income inequality and the struggles of the 99 percent.
Meanwhile, Senate Democrats pushing hard, and will vote this week on a measure that would cut the payroll tax even lower, to 3.1 percent, and would pay for it with a surtax on millionaires. Leading Senate Democrats have been hammering Republicans for their opposition. “The only place in America that people don’t want a fair system are the Republicans here in the Senate,” Senate majority leader Harry Reid said Tuesday. “Republicans outside this Capitol think the rich should share some of the burdens we have in our country today.”
The White House is also on the offensive: the president has been blasting Republicans for refusing to help the middle class with a payroll tax cut, and plans another event in the battleground state of Pennsylvania today. The White House even has a slick payroll tax cut calculator on its website, where families can see how much they would lose if Republicans block the extension.
To be sure, the Republican retreat in the face of this pressure from inside and outside the Beltway is not a full one. They will not agree to the millionaires surtax, but will propose different offsets instead, perhaps by targeting healthcare reform spending. But make no mistake: Republicans gave up in this fight. And they are increasingly concerned their economic message isn’t resonating, according to a story in Politico this morning:
Congressional Republicans have become increasingly divided during the latest legislative battles, with some fearing that the White House is winning the message war over the No. 1 issue facing the country: jobs.
As Congress debates an extension of a payroll tax holiday, a number of Republicans are worried that their party has not done an adequate job responding to the battering they’re taking daily from President Barack Obama on the campaign trail. […]
“I think the Republicans do need to do a better job,” Sen. Dick Lugar of Indiana said. “It’s not really clear that either party has been very successful in meeting what is clearly the No. 1 issue that the public expresses.”
Alabama Sen. Jeff Sessions expressed frustration that the public is “not hearing what the Republicans are offering.”
There are even signs now that Republicans will agree to extend unemployment benefits, which will run out for 2.1 million people at the end of this year. These are relatively minor patches to a floundering economy, to be sure, though still meaningful to many people. And while nobody expects Republicans to suddenly run for the hills in the coming months, it’s clear the dynamic in Washington is changing.