As the tumultuous year of 2011 winds down, Congress will be facing a number of crucial budget deadlines. Aside for the supercommittee deadline to find $1.2 trillion in deficit reduction (over ten years), they must contend with the December 31 expiration of three provisions of the 2010 tax extenders deal; payroll tax cuts, unemployment benefits, and ethanol subsidies. Now the Washington Post is reporting that the supercomittee might attempt to extend unemployment benefits and payroll tax cuts as part of the final deal. The rubber is meeting the road, and conservatives need to mobilize rapidly.
By my count, the supercommittee's final report gives us five issues to deal with; oppose the three extensions, fight tax hikes, and push for real spending cuts (cuts that will make 2013 spending levels below 2012 levels). Over the past year, the GOP has caved on virtually every budget battle. They are now slated to pass every one of Harry Reid's appropriations bills – bills that allocate more funds for programs than requested by Obama; that jettison all Republican policy provisions; that expand the role of Freddie/Fannie. Is there a single issue where GOP leaders will hold the line and coalesce around a coherent conservative policy?
Thanks to the inane and insane debt ceiling deal, which many other conservative outlets supported wholeheartedly, we are confronted with a double-edged sword. We must either accept tax increases and nebulous spending cuts as part of the supercommittee report, or we face sequestration – a process that will kill the military and cut funding to healthcare providers, as well as the border patrol. And guess which programs are exempt from the automatic cuts? Yup – Social Security, Medicaid, S-Chip, Temporary Assistance for Needy Families (TANF), public housing, Food Stamps, SSI, Child Nutrition, refundable tax credits, Pell Grants, and federal employees' retirement. Those programs easily amount to over $1.4 trillion, and when coupled (as it should be) with the inviolable veterans’ programs (roughly $140 billion), we have about 55% of the non-defense budget (roughly $2.85 trillion) off limits.
Now Boehner is offering to compound the problem by passing an extension of the payroll tax cut and 151 weeks of unpaid unemployment compensation. How do they plan to pay for that? With $700 billion in phony war savings, of course.
If Republicans are going to cave on tax increases and inconsequential spending cuts, they should at least hold the line against extension of Obama's two stimulus programs.
Unemployment Insurance (UI) is a joint state and federal program created by the 1935 Social Security Act to offer payments to unemployed workers. It is funded by employers' payroll taxes, with the tax rate set according to that company's layoff history. Those revenues are usually sufficient for states to properly fund their unique unemployment programs for 26 weeks’ worth of benefits. During tough economic times, the federal government has historically reimbursed states for an additional 13 weeks.
Since taking office, Obama, with the help of Republicans, has extended UI benefits for an unprecedented 99 weeks. Over the past three years, state and federal governments have shelled out over $450 billion in benefits, even though they only collected about $175 billion in employer payroll taxes. Obama's proposed extension to 151 weeks will cost another $62 billion in deficit spending. UI is rapidly becoming the fourth largest non-defense expenditure of the federal government and is on the precipice of being enshrined as a permanent entitlement program. If extension of unemployment benefits actually stimulated the economy, we must be missing something. Quite the contrary, unemployment benefits are helping perpetuate unemployment. Extension of extraneous UI benefits is simply indefensible, even if they are offset with real spending cuts (not to mention fake war savings).
Payroll Tax Cut
As part of Stimulus 2.0, Obama is proposing another extension of his temporary 2% payroll tax cut for employees, as well as some additional cuts for employers. While we all like tax cuts, payroll taxes are different from all other forms of taxation. Payroll taxes 'supposedly' single-handedly fund Social Security, yet Obama plans to cut 36% of its revenue source with this stimulus bill, even though SS already faces a $50 billion shortfall. Last year's tax extenders bill authorized $105 billion of general fund transfers in order to cover the shortfall of the payroll tax cut. This year's bill will do the same. Yes, Social Security is a Ponzi scheme, and as such, there is no money in the trust fund. So any further cuts in revenues will necessitate more deficit spending.
Instead of renewing Obama policies that obviously failed to stimulate the economy, Republicans should use this as an opportunity to expose his cavalier attitude to the SS Trust Fund, and call for real free-market reforms. Proper articulation and communication to the American people will work wonders.
Remember that the creation of the supercommittee was supposed to be our 'reward' for giving up our leverage on raising the debt ceiling. Everyone understands that conservatives can't win every concession; however, amidst robust public support for downsizing government, can we at least salvage something from our 2010 victories? We certainly were never supposed to lose out on the deal by incurring tax increases without real spending cuts – or were we?
And if Republicans are incapable of holding the line against tax hikes, trivial spending cuts, defense cuts, Social Security Trust Fund raids, and unemployment welfare, can they please oppose ethanol? Hey, even Bill Clinton and Al Gore agree on that one.