Republicans Capitulate on Payroll Tax

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Big Government wins again. Photo: The Granger Collection

The fight over extending the payroll tax holiday provided one of President Obama’s most favorable grounds to wage his political comeback — here he was defending a policy with strong technocratic merits and broad public appeal. Republicans, who have increasingly come to believe that middle-income Americans are under-taxed, fought it, agreed to a two-month extension, and are now capitulating entirely.

Republicans in Congress never really came out forthrightly against extending the payroll tax holiday. Instead they simply insisted that any lost revenue be paid for — a position they never took in the past when it came to extending the Bush tax cuts. Democrats replied by saying, okay, if you want to pay for the payroll tax cut, why don’t we raise taxes on millionaires? Obviously Republicans didn’t like that idea very much. The two parties were at an impasse over how to pay for the cost of the payroll tax extension, until Republicans today just threw in the towel and said, f— it, let’s just extend the payroll tax holiday with no budget offsets at all.

Is this a good thing? I’d say so. Ending the payroll tax holiday threatens to choke off the incipient economic recovery. It would be nice to reduce the long-term budget deficit, but there’s no particular reason to make protecting the short-term recovery contingent on the two parties resolving their long-term disagreements over the role of government.

What’s more interesting is the politics. A year ago, the House Republicans stormed into power full of manic ambition. But they have fallen into a nearly identical trap as the Newt Gingrich-led 1994 revolutionaries, letting their fanaticism become a pushing-off point for a struggling Democratic president to reassert his standing. Obama seems to have beaten the fight out of the House Republicans. Their new plan seems to be to stop letting Obama score points off them, get out of the way, and hope a Republican can win the presidency in November.