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There are two inexorable political realities at this point: the payroll tax cut must be extended and those who block it will incur a needless political reprisal. To that end, Republicans must outflank the Democrats on the payroll tax cut, while dealing with the entitlement extensions in another bill.
As conservatives, we all agree that a short-term payroll tax holiday – without Social Security reform – is inane policy, both in the realm of economic growth and entitlement reform. We should have either categorically opposed a Keynesian stimulus holiday by calling out the Democrats for their hypocrisy on Social Security, or we should have outflanked the Democrats and called for a permanent diversion of the payroll tax to private retirement accounts. Unfortunately, the ship already sailed on that a long time ago. As the Wall Street Journal noted,” if Republicans didn’t want to extend the payroll tax cut on the merits, then they should have put together a strategy and the arguments for defeating it and explained why.”
Republican leaders already agreed to another “holiday,” albeit with the condition that it be paid for. With less than two weeks to go before its expiration and with a universal expectation that it will be extended, Republicans must pass a clean extension of the payroll tax cut. Anything less would enable the Democrats to get to the right of Republicans on tax cutting.
Last week, Republicans secured superior leverage by becoming the first body to actually pass an extension, while the Senate was unable to pass its own bill. However, Mitch McConnell launched a broadside on his party by agreeing to a lousy two month extension – one that is totally unworkable in the real world. Nevertheless, its 89-10 margin of support gave Democrats all the leverage they needed. Now House Republicans are begging Democrats to join them in a conference agreement to iron out the discrepancies between the two bodies. But this is only playing into the narrative that Republicans are the ones who are obstructing the “only” plan to extend the tax cut. House leaders are justified in their outrage towards the Senate, but we need to focus on current strategy. [We can talk about canning McConnell another time.] Their current strategy of asking for a conference will get them nowhere and will only hurt them.
This is why, for the last time, I call on House Republicans to pass a clean 12-month extension without any strings attached; no riders, reforms, offsets, and extraneous extensions attached. That will totally put the ball back in the Democrats’ court, forcing them to support or reject the only workable extension plan. What about the offsets and Keystone pipeline provision?
Here’s the kicker:
If Republicans pass a clean payroll tax cut extension, and only a payroll tax cut extension, Democrats will still need them to pass the rest of the package, which contains the spending that is most undesirable to conservatives. Republicans should insert their riders (including the pipeline), reforms, and spending offsets into the separate UI extension bill. Democrats would be forced to acquiesce to the reforms if they desire their UI extension. Republicans would be able to fight bad components of the package – 99 weeks of UI and no consequential spending offsets – without worrying about blocking a tax cut. That should be handled in a separate bill. If Democrats block that bill, they will be held accountable.
At present, this is the best option to salvage some of the good provisions, preclude long-term UI benefits from becoming permanent, and prevent Republicans from being blamed for a tax increase. Begging for a conference with Senate Democrats will only put us on defense. Besides, we will never get those spending offsets through conference as long as we are negotiating from a weak position. Eric Cantor is already saying that the duration of the tax cut is “the only issue on which we differ with the Senate.” Well, that in itself is already a capitulation on the numerous other discrepancies such as UI reforms, duration of benefits, and a freeze on hiring in the federal workforce.
Moreover, even the GOP House bill only offsets the spending over the course of ten years. Thus, we have nothing to lose from passing a clean extension, while making Democrats beg for the rest of the extenders package – the part that is not nearly as politically volatile. Keep in mind that the unemployed will still receive benefits commensurate to what was paid into the system for them. It’s only the ridiculous, unprecedented 99-week handout that would be terminated. What are we going to gain from the current strategy?
We need to stop forcing Republicans to face the grim choice between blocking a tax cut and fighting against more entitlement and deficit spending. If you look at the roll call for the ridiculous Senate package, you’ll see that even some good senators, such as Mike Lee and Marco Rubio, voted for it. The bottom line is that they felt this was the last opportunity to prevent a tax increase before the end of the session. As such, they were forced to vote for extension of 99 weeks of UI, phantom offsets, and a new class warfare-induced Social Security Taxable Wage limit that will turn payroll preparation into a nightmare. For this failure of leadership, McConnell should resign his post.
Now Senator Corker is erroneously using the arguments put forth in the WSJ op-ed to conclude that the House pass the Senate’s embarrassing bill. But that bill is untenable. Instead, they should outflank them by passing a clean extension for at least another year, while extracting the spending offsets from Democrats in the separate UI extension bill.
Why are we stuffing in extraneous entitlement spending into a tax cut bill anyway? It is terrible policy and divisive politics for the GOP conference. There is no other option left.