The payroll tax holiday has become a mess for Republicans. I am beginning to believe raw sewage has greater political acumen than the Republican leadership in Washington. At least raw sewage can pick the path of least resistance when flowing through the bowels of Washington, D.C.Not so the Republicans.They have gotten themselves into this mess for three reasons.First, House Republicans were going to vote on their bill and leave town, but decided to play nice with the Senate Democrats. So instead, the Senate did to the House what the House had planned to do and then did not do. The Senate passed its plan and fled.Second, House Republicans let the Senate Republican Leader call the shots. Let us not forget that in the government shutdown against Bill Clinton in the 90’s, House Republicans were betrayed by Senator Bob Dole, the then Republican Leader, who announced the Senate was going back to work when the House expected to stay shut down.Third, and most importantly, the GOP lost — and they did lose, here being clubbed to death like a baby seal — because they abandoned long held Republican principles.
It has been a defining principle of the GOP that drives the left crazy that tax cuts need not be paid for. Tax cuts generate economic grown which then cause the tax cuts to pay for themselves.The GOP abandoned this and instead decided to engage in a tit-for-tat over cuts with the Democrats. The cuts turned into Democrats and Republicans competing to see who could raise fees and taxes to pay for this cut. That is a war that cannot be won right now if not ever.Likewise, the GOP decided to abandon its principled position to getting government out of the way of small businesses. By pushing forward with a two month extension, the GOP decided to leave uncertainty in the mix, which hurts business. And let us not forget that this two month payroll tax holiday extension is wholly unworkable because of the Senate’s changes. Most businesses won’t be able to implement the changes Mitch McConnell agreed to within the time of the tax holiday.Lastly, the GOP believes that continual extensions do not actually generate economic growth. That is why they have fought so hard to make the Bush tax cuts permanent. But here the GOP is letting the Democrats out flank them on tax cuts. This only results from the GOP abandoning basic economic sense and long held Republican principles.So what’s the solution?I think the GOP now needs to out flank the Democrats and call for clean legislation extending the payroll tax holiday permanently with no other provisions. The Democrats will then cry foul and say this risks undermining social security, at which point the GOP will have to openly wonder why then does a second year extension not undermine social security.The fallback position should be to set the expiration based on three consecutive quarters of 3% GDP growth in the economy. End the payroll tax holiday at the end of the immediate next year in which the first three quarters of that year see 3% growth or higher in GDP.That provides an ascertainable point at which the payroll tax holiday should end and premises it on actually doing some good for the economy.But this two month extension should be cause for the GOP to drag Mitch McConnell into the street (metaphorically speaking of course) and let him feel the wrath of employers who don’t know what the hell is going to happen in January. It abandons principles, harms businesses, and perpetuates uncertainty.