Yesterday, most Senate Republicans voted against a Democratic proposal to extend and expand a reduction in the payroll tax. (The cut, due to expire at the end of the month, would put roughly $1,500 a year into the paycheck of 160 million working Americans next year.) Thanks to GOP opposition, a bill to extend the cut was defeated by a vote of 51-49, meaning it failed to meet the artificial 60-vote margin imposed in that body these days. (One Republican, Susan Collins of Maine, voted for it).
OK, you say. That’s not surprising. It was a Democratic plan, so of course Republicans voted against it. However, a majority of those Senate Republicans then turned around and also voted against their own party’s proposal to extend the payroll tax, killing it 20-78. (That plan was funded in part by cutting food stamps and unemployment benefits.)
You may recall that according to Republicans, extending the Bush tax cuts for millionaires was an absolute necessity. In fact, failing to extend that tax cut for the rich would have amounted to a tax increase and was thus verboten. At least, that was the ruling of Grover Norquist, the unelected Washington lobbyist to whom most Republicans have outsourced such determinations.
So, that leads to a question:
Why is failing to extend a temporary tax cut to millionaires considered a tax increase, while failing to extend a temporary tax cut for working people is somehow NOT a tax increase? Why is one unacceptable, and the other unacceptable?
What a silly silly question. Because Grover Norquist told them so, that’s why. As Norquist told reporters after a closed-door session with House Republicans Thursday, “For the president to run around and say not continuing a temporary tax cut is an increase is inaccurate.”
And that’s that.
House Speaker John Boehner, asked whether the tax increase on working Americans would hurt the recovery, demonstrated a rare moment of humility. “I’m not an economist,” he said. “I don’t know what impact it’s going to have on the economy.” That was odd coming from a man who has never previously shied away from bold proclamations about the economic impact of various proposals.
That’s OK though. If Boehner isn’t an economist, other people are. Mark Zandi, the chief economist at Moody’s Analytics, predicts that a failure to extend the tax cut would result in a decline of real GDP growth “by nearly a percentage point and about one million jobs lost by the end of 2012.” According to The Washington Post, “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.”
According to economists, a payroll tax cut has a much more positive impact on the economy than a similar size cut in taxes for the rich. Average working Americans, given an additional $1,500, will spend it, adding much-needed demand to the economy. More affluent Americans, given a tax cut, will tend to sock it away somewhere, adding to the trillions of dollars in capital already sitting on the sidelines in this economy.
But again, since that’s not how Pope Grover I sees it, I guess it doesn’t matter. This is his country, and we just happen to live here.
– Jay Bookman