Republicans Violate Norquist Pledge over Payroll Tax Cut Extension
The Wall Street Journal greeted the failure of the Congressional debt super committee with an editorial titled, "Thank You, Grover Norquist." That gratitude should have surprised no one. After all, Norquist's anti-tax pledge led handcuffed committee Republicans not just to oppose even modest tax increases on the richest Americans, but to demand another tax cut payday for the privileged while slashing federal spending.
As it turns out, however, a tax increase isn't always a tax increase for Norquist's GOP servants. Not, that is, when those receiving the tax cut are working Americans and the President proposing it is a Democrat. Because after they spent 2010 ensuring the extension of the Bush tax cut windfall for the wealthy by insisting "you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans," GOP leaders are demanding exactly that for President Obama's proposal for continued payroll tax relief.
In September, the New York Times reported Republican opposition to Obama's call for another one-year holiday to reduce American workers' Social Security payroll tax from 6.2% to 4.2%. The Times' Jackie Calmes explained the GOP's rationale for its latest obstructionism:
The single biggest stimulus measure he will propose is likely to be temporary payroll tax relief. If the current tax cut, due to expire at the end of the year, is expanded next year to employers as well as employees, it would pump roughly $200 billion into the economy, with the aim of stimulating much-needed demand for goods and services from consumers and businesses and, additionally, of giving companies an incentive to hire...
Republican leaders have said they might support the payroll tax cut's extension if its cost is offset by equal spending cuts, a condition they did not apply for extending the Bush-era tax cuts on high incomes. Mr. Obama has said he will propose long-term deficit savings to offset the short-term costs of his stimulus proposals, though that is not likely to satisfy Republicans.
As it turns out, the new $240 billion package of worker and employer payroll tax cuts was fully paid for under President Obama's overall $447 billion American Jobs Act. But after the failure of the debt super committee to address the request, Democrats are preparing to bring a $400 billion package including the extension of unemployment benefits to a vote. And while Senate Majority Leader Harry Reid "has discussed matching it with a tax increase for millionaires," the White House made clear on Monday "it would support a payroll tax cut that adds to the deficit."
As they showed last year in demanding the extension of the Bush tax cuts for upper-income Americans at a ten-year cost of $700 billion, that should pose no problem for Republicans.
As Jon Kyl (R-AZ), the second-ranking Republican in the Senate and the man now widely credited with single-handedly sabotaging the debt panel, explained in July 2010:
"You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset [the] cost of a deliberate decision to reduce tax rates on Americans."
Kyl's was just the latest repackaging of President Bush's long ago debunked claim that "you cut taxes and the tax revenues increase." Texas Senator Kay Bailey Hutchison parroted that line, "Every major tax cut we've had in history has created more revenue." Then House Minority Leader John Boehner agreed, insisting last June that the Bush tax cuts had nothing to do with the depleted U.S. Treasury, "It's not the marginal tax rates ... that's not what led to the budget deficit. The revenue problem we have today is a result of what happened in the economic collapse some 18 months ago." Confused as ever, Michele Bachmann in December warned about the "reduction to the Treasury in the Social Security taxes" even as she argued "It's curious to me that they say there's a cost involved when people are allowed to keep their own money." For his part, Senate Minority Leader Mitch McConnell rushed to defend Kyl's fuzzy math:
"There's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject."
George Costanza notwithstanding, just because Republicans believe it doesn't mean it's not a lie. Leave aside for the moment that the Bush tax cuts accounted for half of the deficits during his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus - combined.
Not only did Republicans proclaim that the revenue lost to tax cuts never had to be offset, but pretended that failure to extend the gilded-class windfall meant tax hikes for all Americans.
As the looming December 31, 2010 expiration date of the Bush tax cuts approached, President Obama proposed continuing them for 98% of American taxpayers. On July 19, Michigan Republican Dave Camp sent out an email blast warning of the "Democrats' ticking tax time bomb" claiming "Americans to pay higher taxes starting January 1, 2011." On July 20, Rep. Mike Pence (R-IN) declared, "Should Democrats get their way, every income tax bracket will increase on Jan. 1, 2011. Every single one."
It's no wonder Politifact deemed the charge "False." As the fact checking site put it:
"For many months, Democratic officials have consistently said that they intend to let only the tax cuts for the wealthiest individuals lapse. The cutoff they usually suggest is $200,000 for individuals and $250,000 for married couples filing jointly. President Obama campaigned on just such a plan."
"My palm isn't large enough to have written all my notes down on what this tax increase, what it will result in.... Democrats are poised to cause the largest tax increase in U.S. history, it's a tax increase of $3.8 trillion in the next ten years and it will have an effect on every single American who pays an income tax."
Of course, now that the beneficiaries of Uncle Sam's payroll tax cut largesse reside in the middle class, Republicans are predictably silent about a "$70 billion across-the-board tax hike on American workers" come January 1, 2012. As Brad Dayspring, a spokesman for House Majority Leader Eric Cantor put it in August:
"All tax relief is not created equal."
No, the estimated $900 a year cash injection for working American families by maintaining the two percent payroll tax reduction doesn't qualify for Grover Norquist's benevolence:
Sen. Jeff Sessions (Ala.), the ranking Republican on the Senate Budget Committee, said he was uneasy about extending the payroll tax holiday, calling the national debt "a greater threat to us" than the weak economy.
Sadly for Sessions, the American people and economists alike disagree. Polling shows that jobs and the economy are now consistently rated as a higher priority than deficit reduction, even among Republicans. And as the Washington Post explained this week:
Estimates vary on the extent that growth in the gross domestic product could suffer. Goldman Sachs economic forecaster Alec Phillips estimated that allowing the payroll tax cut to expire would reduce growth by as much as two-thirds of a percentage point in early 2012. Macroeconomic Advisers estimates that it would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs by the fourth quarter. Allowing unemployment benefits to lapse would result in the economy being slower by an additional quarter of a percent and cost 200,000 jobs.
CNN echoed those conclusions about the impact of letting the payroll tax cuts expire:
Without that extra money in their pockets, consumers won't have as much purchasing power, and that will drag down economic growth as consumers spend less.
Economists at Capital Economics expect that consumption growth will suffer "a very sharp slowdown in the first quarter of next year if the payroll tax cut is not extended," according to a research note released Monday.
And Moody's Analytics estimated in August that letting the tax cut expire would reduce growth by as much as 0.5%, and called extending the cut one of the "most straightforward" ways to "reduce some of the coming fiscal restraint."
As Jon Kyl, he of "not intended to be a factual statement" fame, fealty to Grover Norquist trumps all. As Dana Milbank described Kyl's "search and destroy mission" on the debt committee:
When Democrats floated their proposal combining tax increases and spending cuts, Kyl rejected it out of hand, citing Republicans' pledge to activist Grover Norquist not to raise taxes. Kyl's constant invocation of the Norquist pledge provoked Senate Majority Leader Harry Reid (D-Nev.) to snap at Kyl during a private meeting: "What is this, high school?"
...Norquist, who worked to defeat a compromise, brags about his control over Kyl. When Kyl made remarks in May that appeared to leave open the possibility of tax increases, Norquist called Kyl and adopted "the tone of a teacher scolding a second grader as he recalled the conversation," Politico reported. Norquist boasted to the publication that, after he upbraided Kyl, the senator "went down on the floor and he gave a colloquy about how we're against any tax increases of any sort. Boom!"
As it turns out, there is one sort of tax increase Kyl and his Republicans apparently are just fine with - one on working Americans. President Obama pointed out the irony yesterday in New Hampshire:
Obama urged Congress to extend a Social Security payroll tax cut due to expire next month. In effect, he dared Republicans -- many of whom have signed anti-tax pledges -- to vote against an extension, a move the White House says would lead to a $1,000 tax hike on a family making $50,000 a year.
If lawmakers vote "no, your taxes go up. Yes, you get a tax cut," Obama told the crowd. "Which way do you think Congress should vote?"
Today, Texas Republican John Cornyn provided his party's answer. "In terms of the payroll tax holiday, I would let that go back to where it was."
For the Republicans living on Grover Norquist's tax cut Animal Farm, some tax cuts are more equal than others.