What Today's Payroll Tax Vote Means

Dec 20th, 2011

Allow me to register my total lack of surprise. AP reports:

"The House Tuesday rejected legislation to extend a payroll tax cut and jobless benefits for two months, drawing a swift rebuke from President Barack Obama that Republicans were threatening higher taxes on 160 million American workers on Jan. 1.

Obama said the two-month compromise is the only way to stop payroll taxes from going up by two percentage points.

"Now let's be clear," Obama said in a surprise appearance in theWhite House briefing room after the House vote. "The bipartisan compromise that was reached on Saturday is the only viable way to prevent a tax hike on January 1st. The only one."

First of all, this was a case of hostage taking. It's plain and simple. If the GOP had wanted to keep the payroll rate in place, all they had to do was vote for it. They insisted that it "had to be paid for." How does this square with their 30 year mantra that "tax cuts" pay for themselves by magically expanding growth? It doesn't and an obedient media is largely obliging them by not asking about that. More predictably and repulsively, they not only insisted that the proposed Keystone XL pipeline was somehow related to the payroll tax rate, but they uniformly parroted each and every proven falsehood regarding that project.

What does it mean for you? The chart below shows it clearly.

Graphic via CNN

Some reactions to today's exercise in congressional futility...

David Frum writes:

"The Senate passed a two-month stopgap tax holiday because it could not agree on how the tax measure was to be “paid for.” Senate Republicans wanted bigger spending cuts, including a pay freeze for federal workers. Senate Democrats wanted a series of pin-prick upper-income tax increases, including an end to the tax deductibility of corporate jets.

Because the “pay for” could not be agreed, the Senate passed a stopgap holiday.

Because the House Republicans think the stopgap holiday is stupid, they won’t adopt the Senate version.

Because the Senate quit for Christmas after enacting the stopgap, the House’s refusal now threatens to put an end to the payroll holiday altogether.

Is this any way to run a great country?

Why do we have to agree now on how to balance the budget later? Isn’t emerging from this economic slump a big enough challenge? No creditor is demanding an early budget-balance plan. On the contrary, the world is eager to lend the US money at bargain rates. Congress is so consumed by tomorrow’s problem that it will not address today’s crisis.

This is the real-world consequence of the wrong idea introduced to US politics that it is debts and deficits that caused the slump, rather than the other way around. For the moment, it’s all farcical. It could easily turn tragic."

Were talking about removing roughly $100 billion dollars from the world's most consumer-demand driven economy (approximately 70%) during the worst crisis in four generations. Whether or not we move from farce to tragedy, as Frum fears, we are already firmly in the realm of lunacy. While many writers, such as John Batchelor, are pushing the line that this is an equal and bipartisan failure, that's just nonsense.

Steve Benen is particualrly incensed:

"House Republicans entered the day with one goal in mind: kill a bipartisan compromise on a middle-class tax cut, the week before Christmas, without looking ridiculous. After days of meetings and delays, a broken promise to hold an up-or-down vote on the Senate bill, and a surprising number of pot shots at their Senate Republican colleagues, the House GOP came up with a convoluted scheme."

"The way House Republicans have set this up, those who vote "yes" are actually voting "no" on the bipartisan Senate compromise. In fact, under this scheme, the House will hardly be voting on the Senate version at all -- Republicans know they're inviting political trouble by rejecting a middle-class tax cut -- and will instead be kinda sorta voting to send the competing versions of the payroll extension to conference committee.

And what's wrong with that? In theory, this might sound reasonable -- the House and Senate passed radically different bills on the same issue, so the standard operating procedure would be for a conference committee to work out a consensus bill that falls somewhere between the two.

But in this case, what's theoretically reasonable is irrelevant. It would take the Senate a week just to assign members to the committee, and the odds of the two sides quickly finding a financing solution for a 12-month extension before the calendar year wraps up are roughly zero.

In other words, the new House Republican scheme is intended to raise middle-class taxes without making it look like House Republicans are raising middle-class taxes. In two weeks, Americans will discover in early January that their paychecks have shrunk, and because political journalism is largely broken, they'll be told it's the result of "both sides" being unwilling to compromise."

Benen cites this explanation of what happened with the warning that it is likely to make your eyes glaze over:

"Initially, the House Republicans planned to hold a standard vote on a "motion to concur" with the Senate tax cut extension.... But in a heated meeting of the Rules Committee that determines how votes are held, the motion was changed to a "motion to reject."

What was originally scheduled to be three votes -- a vote on the Senate bill, a vote to go into conference with the Senate to change the bill, and a vote on a nonbinding resolution relating to the debate -- turned into one. The final rule that passed the committee, along party lines, allows for a single vote to reject a motion to agree with the Senate bill. If the motion is rejected, the bill is sent to a conference committee. [...]

Rules Committee Chairman David Dreier (R-Calif.) said a vote to reject the Senate bill and send it to conference is "exactly" the same as a vote to concur with the bill.

It is still "regular order" for the House to specifically vote to "reject" a bill versus holding an up-or-down vote on a bill, Dreier said. Anyone who supports the Senate bill can simply "vote in opposition to that motion to go to conference."

Got that? 

Enjoy your double dip and don't forget who got us there.