The White House is reportedly looking for an alternative to the payroll tax cut that does the same thing as the payroll tax cut but isn’t called the payroll tax cut. This might seem a bit odd to you. But it’s a perfectly natural by-product of the GOP’s strategy of denying President Obama popular accomplishments.
Here’s what’s going on: In 2009, Barack Obama passed a perfectly good tax cut called Making Work Pay. MWP was a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers. If you wanted to give a tax cut to working families, it was as good a tax cut as any.
But it was, crucially, Obama’s tax cut. And so, in 2010, Republicans refused to extend it. Now, if they had refused to extend it because of cost, or because they just didn’t think it made sense to cut taxes at a time when tax revenue was already low, that would be one thing. But that wasn’t the case. They just didn’t want to extend a tax cut associated with the Obama administration. So Republicans instead agreed to cut the payroll tax.
The payroll tax did pretty much the same thing as MWP. But it wasn’t an Obama administration idea. It was an idea, in fact, that Republicans had proposed earlier in the recession, and that Democrats are sometimes nervous over because it appears to undermine Social Security’s key funding source. So Republicans could sell the shift as a concession from the Democrats.
That’s politics, and if it had ended there, then fine. But it didn’t. Fast forward a year and the payroll tax cut is now an Obama administration accomplishment. So Republicans again begin to abandon the payroll tax cut. Toward the end of 2011, they can only be persuaded to extend it for two months, and it’s only after getting hammered by business interest groups and editorial pages that they agree to extend it through 2012.
This year, 2012, is almost over. The labor market remains weak, borrowing costs remain low, and so the case for keeping taxes on working Americans low remains strong. But there’s no way Republicans will back the payroll tax cut again. That said, Republicans still support tax cuts in general, and so even if they now oppose the payroll tax cut, they can potentially be pressured into supporting some kind of replacement for the payroll tax cut.
So now the White House is looking for a third iteration of their tax cut. It can’t be MWP, because that’s connected to Obama, and it can’t be the payroll tax cut, because that’s connected to Obama. It needs to be something that the Obama administration likes, but that they have not publicly said they like, because if they’ve publicly said they like it, then Republicans can’t support it.
And that’s how we make policy these days.