In surprise move, GOP leaders admit defeat in payroll tax battle

Grendel · Feb 13, 2012

In surprise move, GOP leaders admit defeat in payroll tax battle

House GOP leaders had wanted to offset the cost of a payroll tax extension by spending cuts. But their decision Monday suggests that the political cost of a stalemate was too high.

By Gail Russell Chaddock, Staff writer / February 13, 2012

The move, which would keep payroll taxes at their current 4.2 percent rate through 2012, is expected to add another $83 billion to federal budget deficits. Republicans had wanted to offset that amount through spending cuts.

In surprise move, GOP leaders admit defeat in payroll tax battle - CSMonitor.com

GOP finally gave in to the Democrats and allowed a tax cut for the working class. I had expected them to fight against it harder than they did, but I guess it's a tight rope to walk when you're fighting against tax cuts for working people, and fighting against tax increases for super-rich people, especially when working people are having a very, very difficult time of it.

It was fun to watch them fight against tax cuts during an election year, but it's good that they've finally capitulated and agreed to allow it.

DiAnna · Feb 13, 2012

I'm glad to see this too. It will help a lot of folks feel a bit less of a payroll pinch. To be fair, however, unless the government comes up with some serious spending cuts and stops the "not in my district" mentality, it's just a political ploy to make people feel good for the moment while the country inches even closer to ultimate bankruptcy.

Rhapsody1447 · Feb 13, 2012

Two weeks ago when discussing the latest lunacy surrounding America's exponential curve #1 also known as its debt balance, we suggested what the GOP election strategy should be: "[if] the debt ceiling becomes a sticking point at the election, Obama's chances of reelection plunge. Which makes us wonder - will Republicans grasp that the paradox of defeating Obama is precisely in giving him a carte blanche on all the stimulus programs he wants? Because if Congress approves another $200, 300 or even $400 billion in stimulus pork (the only thing better than one Solyndra? One thousand Solyndras!) the Treasury will drown in the need to raise hundreds of billions more, and will in fact hit the ceiling well in advance of the elections. As for the stimulus projects themselves, they will crash and burn just like all centrally planned endeavors, and actually result in a far worse outcome than if they had never been attempted. [Because] the best way to finally get back to a fiscally prudent regime? Why go to town, of course." We were delighted to discover that our policy anti-recommendation has finally been adopted. Because as the WSJ reports when it comes to the latest payroll tax extension we find something quite stunning: "House Republican leaders said Monday they would introduce a bill extending the payroll-tax break for the rest of the year without finding spending cuts to offset the program's cost. The proposal marks a major shift for Republicans, who previously had insisted that the costs of extending a trio of provisions expiring at the end of the month be offset with spending cuts." That's right - no offsetting spending cuts. Which means one thing - much more debt. How much more? At least $160 billion much. Which means that the debt ceiling discussion will hit not in November as we speculated previously, but potentially as soon as September.

GOP Finally Discovers Obama's Achilles Heel: Just Let Him Do What He Does... And Encourage It! | ZeroHedge

Fletch · Feb 13, 2012

BooRadley said:
In surprise move, GOP leaders admit defeat in payroll tax battle - CSMonitor.com

GOP finally gave in to the Democrats and allowed a tax cut for the working class. I had expected them to fight against it harder than they did, but I guess it's a tight rope to walk when you're fighting against tax cuts for working people, and fighting against tax increases for super-rich people, especially when working people are having a very, very difficult time of it.

It was fun to watch them fight against tax cuts during an election year, but it's good that they've finally capitulated and agreed to allow it.

You must not have been paying attention. The republican congress passed a one year extension of the payroll tax cut back in december. The issue was how to pay for it, not whether it should happen. What was odd was the republican argument that suddenly taxes had to be paid for now that Obama wanted them.

OpportunityCost · Feb 13, 2012

BooRadley said:
In surprise move, GOP leaders admit defeat in payroll tax battle - CSMonitor.com

GOP finally gave in to the Democrats and allowed a tax cut for the working class. I had expected them to fight against it harder than they did, but I guess it's a tight rope to walk when you're fighting against tax cuts for working people, and fighting against tax increases for super-rich people, especially when working people are having a very, very difficult time of it.

It was fun to watch them fight against tax cuts during an election year, but it's good that they've finally capitulated and agreed to allow it.

From the article :

The move, which would keep payroll taxes at their current 4.2 percent rate through 2012, is expected to add another $83 billion to federal budget deficits. Republicans had wanted to offset that amount through spending cuts.

Shouldnt we just be doing spending cuts anyways? Shrug

pbrauer · Feb 13, 2012

Rhapsody1447 said:
GOP Finally Discovers Obama's Achilles Heel: Just Let Him Do What He Does... And Encourage It! | ZeroHedge

:lamo WTF, ZeroHedge actually thinks it's a good thing the GOP caved? Oh tay.

Grendel · Feb 13, 2012

OpportunityCost said:
From the article :

Shouldnt we just be doing spending cuts anyways? Shrug

We should ahve been doing spending cuts during the economic boom of the early 2000's. Instead, we spent like drunken sailors and then started hollering for spending cuts when the economy had already tanked, when it would have disastrous effects.

DiAnna · Feb 13, 2012

BooRadley said:
We should ahve been doing spending cuts during the economic boom of the early 2000's. Instead, we spent like drunken sailors and then started hollering for spending cuts when the economy had already tanked, when it would have disastrous effects.

I couldn't agree more. Came into 2000 with a balanced budget, and wham. Suddenly a "balanced budget" was congressionally interpreted as "unlimited funds, wheeeee!"

Now the damage is done, and we're never going to get those dollars back. All pork should be automatically eliminated, and cuts should start with congressional and administrative salaries, and go right down the line. Then corporations and rich folk (sorry, TurtleDude) need to ante up a bit more, after tax loopholes are eyeballed... hard.

Won't happen but... :shrug:

Blue_State · Feb 13, 2012

Huzzah...we made more debt. We should all celebrate.

Instead of this tax holiday, lower the cost of fuel. That will generate some real stimulus.

Renae · Feb 14, 2012

DiAnna said:
I couldn't agree more. Came into 2000 with a balanced budget, and wham. Suddenly a "balanced budget" was congressionally interpreted as "unlimited funds, wheeeee!"

Now the damage is done, and we're never going to get those dollars back. All pork should be automatically eliminated, and cuts should start with congressional and administrative salaries, and go right down the line. Then corporations and rich folk (sorry, TurtleDude) need to ante up a bit more, after tax loopholes are eyeballed... hard.

Won't happen but... :shrug:

There was no balanced budget.
Taxing the "rich" more will do little to dent our spending.

What needs to happen is the whole ****ing system collapses so people can pull their heads out of their asses and fix the problem instead of jerking off for political points hoping the system doesn't collapse while they're still alive.

MoSurveyor · Feb 14, 2012

MrVicchio said:
There was no balanced budget.

http://www.gpoaccess.gov/usbudget/fy06/pdf/hist.pdf

p.24 = *.pdf p.28

sawyerloggingon · Feb 14, 2012

Taxing the rich may make the rest of us feel good but it will do absolutely nothing to fix our economy or reduce the deficit, only cutting spending will do that.

AdamT · Feb 14, 2012

sawyerloggingon said:
Taxing the rich may make the rest of us feel good but it will do absolutely nothing to fix our economy or reduce the deficit, only cutting spending will do that.

That's a rather absurd statement. Deficits are created when spending outpaces revenue. Deficits can be reduced by cutting spending, raising revenue, or preferably, both.

Samhain · Feb 14, 2012

MoSurveyor said:
http://www.gpoaccess.gov/usbudget/fy06/pdf/hist.pdf

p.24 = *.pdf p.28

Which compared to actual spending and revenue never materialized.

Samhain · Feb 14, 2012

AdamT said:
That's a rather absurd statement. Deficits are created when spending outpaces revenue. Deficits can be reduced by cutting spending, raising revenue, or preferably, both.

Absolutely. We need to do both, and lets be honest about it: nobody in Washington has the balls to do it.

Blue_State · Feb 14, 2012

AdamT said:
That's a rather absurd statement. Deficits are created when spending outpaces revenue. Deficits can be reduced by cutting spending, raising revenue, or preferably, both.

I am for cutting spending and raising revenue. I would love to hear someone argue against that.

Fletch · Feb 14, 2012

Blue_State said:
I am for cutting spending and raising revenue. I would love to hear someone argue against that.

Raising revenue cuts only one thing, and that is the urgency to reduce spending.

Erod · Feb 14, 2012

AdamT said:
That's a rather absurd statement. Deficits are created when spending outpaces revenue. Deficits can be reduced by cutting spending, raising revenue, or preferably, both.

Taxing the rich will produce piss in a bucket compared to the ocean of debt we're in. Then, those rich people will get mad and recoup their losses by cutting their workforce, reducing compensation, and taking more of their business overseas and destroy every union out there.

Liberals just want to raise taxes on the rich because they resent their success. Nothing more and nothing less. Imagine if we actually made that whiny 47 percent of Americans pay federal taxes?

cpwill · Feb 14, 2012

Blue_State said:
I am for cutting spending and raising revenue. I would love to hear someone argue against that.

no one is. we simply point out that thinking that one can raise revenue by seriously jacking up rates is historically exceedingly unlikely:

if you want to raise revenue therefore, you have two options: 1. sell stuff (the US owns a lot of generally useless land) and 2. economic growth.

now, Obama's plan is to continue to spend at about 24% of GDP. looking at the graph above, it should be pretty easy to see how well that is going to work.

repealing the Bush tax cuts, in the meantime, will get us (according to a static scoring model, which is to say, if one takes the wildly optimistic option) an extra $80 billion. out of a deficit of about $1.3 Trillion. that's not even a rounding error.

AdamT · Feb 14, 2012

Fletch said:
Raising revenue cuts only one thing, and that is the urgency to reduce spending.

I could make an equally falacious and opposite argument: cutting spending doesn't reduce deficits -- it just provides an exucse to cut taxes further.

MaggieD · Feb 14, 2012

BooRadley said:
In surprise move, GOP leaders admit defeat in payroll tax battle - CSMonitor.com

GOP finally gave in to the Democrats and allowed a tax cut for the working class. I had expected them to fight against it harder than they did, but I guess it's a tight rope to walk when you're fighting against tax cuts for working people, and fighting against tax increases for super-rich people, especially when working people are having a very, very difficult time of it.

It was fun to watch them fight against tax cuts during an election year, but it's good that they've finally capitulated and agreed to allow it.

Republicans are fools for not wanting to increase taxes on people with incomes over $200,000 -- and raise the capital gains tax!!! They are out of touch with 90% of the American people. Right now, we need spending cuts and more revenue. Time to cut the bull****.

(Sorry, Turtle.)

AdamT · Feb 14, 2012

cpwill said:
no one is. we simply point out that thinking that one can raise revenue by seriously jacking up rates is historically exceedingly unlikely:

if you want to raise revenue therefore, you have two options: 1. sell stuff (the US owns a lot of generally useless land) and 2. economic growth.

now, Obama's plan is to continue to spend at about 24% of GDP. looking at the graph above, it should be pretty easy to see how well that is going to work.

repealing the Bush tax cuts, in the meantime, will get us (according to a static scoring model, which is to say, if one takes the wildly optimistic option) an extra $80 billion. out of a deficit of about $1.3 Trillion. that's not even a rounding error.

The graph is misleading due to the scale factor of the taxes line. In fact there is a huge difference in dollar terms between raising revenue at a rate of 17% of GDP and raising revenue at a rate of 20% of GDP. In 2010, for example, the difference would have been just shy of $500 billion. Projecting even that low-GDP year over ten years results in a deficit reduction of $5 trillion.

Fletch · Feb 14, 2012

AdamT said:
I could make an equally falacious and opposite argument: cutting spending doesn't reduce deficits -- it just provides an exucse to cut taxes further.

You are right, that is a fallacious argument.

cpwill · Feb 14, 2012

AdamT said:
The graph is misleading due to the scale factor of the taxes line. In fact there is a huge difference in dollar terms between raising revenue at a rate of 17% of GDP and raising revenue at a rate of 20% of GDP.

yes. just as there is an even huger difference in dollar terms between the average 20% of GDP that Bush spent, and the average 24.5% of GDP that Obama is spending.

In 2010, for example, the difference would have been just shy of $500 billion. Projecting even that low-GDP year over ten years results in a deficit reduction of $5 trillion.

indeed. so, now that we have agreed we prefer to collect in revenue closer to the 20% side than the 17% side... under which tax conditions do we historically see revenues coming in at closer to the 20% side? when marginal rates were higher? or lower?

(i'll give you a hint - 1983 is sort of a big year).

however, even that isn't as critical as it seems - because what the graph indicates is that revenues are not a direct function of tax rates. rates can fluctuate wildly without producing a comparable fluctuation in revenues - indicating that they are not controlling. but revenue does seem to generally be a direct function of GDP. If you want more revenue, therefore, you need economic growth. which you won't get by dramatically hiking marginal tax rates.

cpwill · Feb 14, 2012

MaggieD said:
Republicans are fools for not wanting to increase taxes on people with incomes over $200,000 -- and raise the capital gains tax!!!

ah. and at a time when we are desperately attempting to attract capital to invest in a struggling manufacturing renaissance in our shores... do you think that that will make people more likely to send their money here? or less likely to send our money here? when most small businesses that are left are surviving because they have balanced on a knife edge for three or more years now, do you think that increasing their costs while decreasing their available pool of investors will make them more likely to succeed and survive? or less likely to succeed and survive?

In surprise move, GOP leaders admit defeat in payroll tax battle

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