Both Sides Claim Victory in the Extension of the Payroll Tax Cuts

By: Abby Schopick

Both the Democrats and the Republicans are claiming victory after the February 17passage of the Middle Class Tax Relief and Job Creation Act of 2012, also known as H.R. 3630. But how is it that the Republicans are claiming victory on a bill that the Democrats clearly won on the issues? In fact, the Republicans have even described the passage of the bill as a “bitter pill.” (http://www.foxnews.com/politics/2012/02/17/house-approves-payroll-tax-cut-extension/).

H.R. 3630, which passed the House by a vote of 293-132, and the Senate by a vote of 60-36, was signed into law by President Obama on February 22. The bill extends the 2% payroll tax cut that prevents millions of middle class Americans from paying increased payroll taxes, extends unemployment benefits, and prevents doctors who treat patients on Medicare from suffering drastic cuts in reimbursement.

The extension of the payroll tax cut is expected to cost the federal government around $93 billion. “[B]owing to [the extension’s] inevitability, House GOP leaders last week agreed not to demand spending cuts to offset the lost tax revenues.” (http://www.msnbc.msn.com/id/46489938#.T0wBwPXN068). So how is it that the Republicans are claiming victory even though the Democrats clearly won the battle on the issues? The Republicans contend that the Democrats intended to use Republican opposition to the bill against the Republicans in the 2012 elections, but no longer can. Republicans essentially are saying that the Democrats wanted the Republicans to vote against this bill so that in the upcoming elections they could attack Republican candidates for voting against a measure designed to help the middle class and the unemployed. It appears that, by these beliefs, the Republicans apparently believe that the Democrats actually wanted the payroll tax bill to fail, despite the fact that many Democrats, including President Obama, have strongly pushed for the passage of an extension to the payroll tax cut.

Extension of the payroll tax cut has been contentious for quite some time. The current extension came as the previous, temporary extension, which was passed in December, was set to lapse on March 1. On average, the payroll tax cut is estimated to save middle class individuals approximately $40 per paycheck, or $80 per month. While politicians on both sides of the aisle have a hard time voting against saving money for middle class individuals who are currently struggling in this economy, both Republicans and some Democrats expressed concern, that failure to offset the tax cut would increase the deficit substantially. Additionally, some have expressed concern that not collecting payroll taxes, which are used to fund social security, “endangers the long-term viability of Social Security.” (http://harkin.senate.gov/press/release.cfm?i=336055). Senator Harkin (D-IA), said, “Make no mistake about it. This is the beginning of the end of the sanctity of Social Security.” (http://www.foxnews.com/politics/2012/02/17/house-approves-payroll-tax-cut-extension/).

There has also been concern that the agreements made to get this bill passed sold out federal workers. In addition to extending the payroll tax cut, the legislation also includes an extension of unemployment benefits. In a move that is unpopular for many in the DC area, and caused some powerful Democratic Representatives, such as Democratic Whip Steny Hoyer (D-MD) and former-DCCC Chairman Chris Van Hollen (D-MD) to vote against the bill, newly hired federal government employees will now be required to pay a higher percentage into their pension plans than current employees to help offset the cost of the extension of unemployment benefits. President Obama and many Democrats fought to allow the unemployed to continue to receive benefits for 99 weeks. They were, however, forced to compromise, and now the unemployed are eligible for between 63 and 73 weeks of unemployment benefits, depending on the unemployment numbers in their state. While some provisions of H.R. 3630 are not offset at all, the unemployment benefit section is. In addition to the increases in contributions by federal employees, the federal government plans to auction broadcast frequencies to help pay for this portion of the bill.

Both sides are claiming victory on the unemployment benefits provisions. The Democrats are claiming victory on the basis of the extension of the benefits. Republicans are boasting that they were able to cut down on the number of weeks that individuals can claim benefits. Congresswoman Barbara Lee (D-CA), who co-chairs the Congressional Out of Poverty Caucus, released a statement that “[i]nstead of scaling back unemployment benefits we need to be adding weeks to help people get by when there continues to be four workers in line for each job.” (http://lee.house.gov/press-releases/barbara-lee-votes-against-cuts-to-unemployment-benefits-cuts-to-public-health-fund-and-hospitals/). With unemployment still at record numbers, the Republicans surprisingly still find it prudent to focus on cutting benefits for the unemployed, but have yet to produce a viable plan to help revitalize the economy and add much needed jobs. While the Republicans claim the plan put forward by Rep. Paul Ryan (R-WI) will turn around the economy and help the poor, the Congressional Budget Office’s analysis of the bill stresses that the bulk of the additional revenue for the federal government will come from higher costs to senior citizens under Medicare, a group of people who can hardly afford to be paying more for their health care.

The third major portion of H.R. 3630 prevents a 27% cut in federal reimbursements for doctors who accept patients on Medicaid. This plan, referred to as the “doc fix,” is a temporary measure that would prevent reimbursement cuts through the end of the 2012 calendar year. This will be paid for by taking money from other federal health programs, such as allocations in the Affordable Care Act for programs to help prevent some negative health effects from smoking and obesity. While Democrats and Republicans generally disagree on Medicare funding issues, both sides seem to agree that there needs to be actual reform of the system rather than patchwork fixes to prevent things like these reimbursement cuts that both sides agree would be a devastating blow to those covered by Medicare since decreasing the reimbursement to doctors will cause the doctors to stop seeing Medicare patients.

Overall, passage of H.R. 3630 was necessary. Allowing taxes to increase for the middle class was an unpopular move for everyone. Also, extending necessary unemployment benefits and preventing a devastating cut in reimbursement for doctors were also necessary measures. It says a great deal about the dysfunctional state of our politics that the extension of the payroll tax cut could not be offset by asking individuals making a million dollars per year to contribute through a modest increase in taxes. It is also speaks volumes about the triumph of message over substance in our politics that the Republicans are managing to claim victory on this bill, while at the same time expressing disappointment about the components of the bill.

Sources

http://www.nytimes.com/2012/02/18/us/politics/congress-acts-to-extend-payroll-tax-cut-and-aid-to-jobless.html

http://www.foxnews.com/politics/2012/02/17/house-approves-payroll-tax-cut-extension/

http://politics.nytimes.com/congress/bills/112/hr3630

http://thomas.loc.gov/cgi-bin/bdquery/z?d112:h.r.03630:

http://www.whitehouse.gov/the-press-office/2012/02/22/statement-press-secretary-hr-3630

http://www.msnbc.msn.com/id/46489938#.T0wBwPXN068

http://abcnews.go.com/blogs/politics/2012/02/will-payroll-tax-cut-unravel-social-security-robert-gibbs-says-not-in-any-way/

http://harkin.senate.gov/press/release.cfm?i=336055

http://www.thenation.com/blog/166435/week-poverty-deal-unemployment-benefits-leaves-out-poorest

http://lee.house.gov/press-releases/barbara-lee-votes-against-cuts-to-unemployment-benefits-cuts-to-public-health-fund-and-hospitals/

http://www.heritage.org/research/reports/2012/02/the-doc-fix-dilemma-calls-for-immediate-medicare-reforms