The Wall Street Journal editorial board unhappily argues: “House Republicans yesterday voted down the Senate’s two-month extension of the two-percentage-point payroll tax holiday to 4.2% from 6.2%. They say the short extension makes no economic sense, but then neither does a one-year extension. No employer is going to hire a worker based on such a small and temporary decrease in employment costs, as this year’s tax holiday has demonstrated. The entire exercise is political, but Republicans have thoroughly botched the politics.”
Let’s say it is not the Republicans’ finest hour. The Senate Republicans managed to extract two “gets” out of President Obama and the Democrats in forcing the inclusion XL Pipeline language and rebuffing a tax hike. The House Republicans may be right in arguing tax policy shouldn’t be set two months at a time. And they are right that both houses are supposed to meet in conference if they can’t agree on passage of a single bill. But, at the risk of stating the obvious, it’s a little late to bring all that up.
The Journal editors suggest: “At this stage, Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly. Then go home and return in January with a united House-Senate strategy that forces Democrats to make specific policy choices that highlight the differences between the parties on spending, taxes and regulation. Wisconsin freshman Senator Ron Johnson has been floating a useful agenda for such a strategy. The alternative is more chaotic retreat and the return of all-Democratic rule.”
Johnson is suggesting implementing seven of the spending-cut ideas from the Simpson-Bowles debt commission, which amount to a cut of $655 billion over 10 years. These are relatively noncontroversial items such as reducing congressional and White House budgets by 15 percent, imposing a three-year freeze on federal workers’ pay, reducing the size of the federal workforce and selling excess government real estate. In other words, Johnson is asking if his colleagues can’t at the very least agree to chop the low-hanging fruit in the budget.
Well, it would have been nice if the supercommittee could have managed that, or if that kind of package of cuts could have been presented as a full year offset for the payroll tax reduction. But that’s for next year.
The GOP, if it has not the wherewithal to oppose a payroll tax reduction (When will Congress ever have the nerve to increase it and stem further hemorrhaging of funds available for Social Security? Why not cut the entire tax, according to the Democrats’ logic?), then cut a deal and come back to finish the work in 2012. If the Democrats want another 10 months of payroll tax relief, then Republicans should get something for that (e.g. more cuts, a definitive decision on the pipeline). Just not now. In January.
UPDATE: It is not clear that the Journal was referring to Johnson’s Simpson-Bowles proposals. But plainly, those are a good start and any other constructive ideas for jump starting real fiscal and tax reform would be welcomed.