With unemployment at 8.6 percent, extending the payroll tax cut for another year is the right thing to do.
The problem lies in it being the only fiscal accomplishment of the Christmas season.
In principle, Obama has other items on his wish list. He’d like to extend unemployment benefits. Pay for those and the tax cuts, too. Build more roads and keep more teachers and police officers on the job. Even, in theory, reduce the long-term debt. After all, the mantra is short-term stimulus, long-term balance, restore confidence.
But the president has drawn only one line in the sand, issued only one non-negotiable demand, insisted on only one achievement without which he will fight Congress going home for the holidays: extending the payroll tax cut.
His rhetoric risks transforming this giveaway, like so many “temporary” giveaways before it, into something permanent. This one was supposed to be different, because it siphons money from the supposedly sacrosanct Social Security trust fund.
Now, though, Obama says anyone favoring a return to normal is voting for an unconscionable tax hike on the struggling middle class. His logic will fit nicely into Grover Norquist’s narrative a year from now when the Bush tax cuts, including on the wealthy, are due to expire.
I asked an administration official what level of unemployment would justify an end to the Social Security tax break — 7.5 percent? 7 percent? I didn’t get a direct answer. It seems unlikely that anyone, a year from now, will argue that working Americans no longer need a break.
But the official said the problem can be worked out as part of a larger package of tax reform.
Tax reform is the answer to all problems, for Republicans and Democrats alike. We’ll “close the loopholes” and “broaden the base” and “lower the rates.” It sounds terrific, as long as you pretend that the loopholes consist of things such as private jet depreciation, the president’s favorite example and one that costs the government, in the great red-ink scheme of things, almost nothing.
Eventually, though, someone will have to explain to voters that the only way tax reform works is by limiting their deductions for mortgage interest, charitable giving, state and local taxes, and employer-provided health care. At that point it will become savagely clear that one man’s loophole is another man’s birthright.
And it’s not only by increasing the debt that this tax cut makes an eventual solution more difficult. The proposals Congress is considering to “pay for” this cut, meant to prove its fiscal discipline, ironically also make a grand deal more difficult.
Democrats want to increase taxes on million-dollar earners; Republicans want to charge high earners more for Medicare. In an age of growing inequality and out-of-control entitlement spending, both measures may make sense, but both will be needed in the hard bargaining ahead. Commit 10 years of them now for a one-year shot in the arm, and the bargaining gets that much tougher.
The economy still needs stimulus, and Obama is hardly the first incumbent to want to give voters a present as he gears up for reelection. Fifteen hundred dollars in each of our pockets will be a handy conversation-opener on the campaign trail, for the president and members of Congress alike.
That’s good politics.
Drawing one additional line in the sand, for at least a down payment on the long-term debt, would have been good leadership.
That true leadership also might make for good politics is a chance that, so far, no one has been willing to take.