What even minimally rational government enacts payroll tax relief for just two months? As a matter of practicality alone, it makes no sense. The National Payroll Reporting Consortium, representing those who process paychecks, said of the two-month extension of the payroll tax holiday passed by the Senate just days before the new year: “There is insufficient lead time to accommodate the proposal,” because “many payroll systems are not likely to be able to make such a substantial programming change before January or even February,” thereby “creat(ing) substantial problems, confusion and costs.”
Moreover, what business operates two months at a time? The minimal time horizon for business is the quarter — three months. What idiot came up with two? U.S. businesses would have to budget for two-thirds of a one-quarter tax-holiday extension. As if this government has not already heaped enough regulatory impediments and mindless uncertainties upon business.
But making economic sense is not the point. The tax-holiday extension — presumably to be negotiated next year into a 12-month extension — is the perfect campaign ploy: an election-year bribe that has the additional virtue of seizing the tax issue for the Democrats.
Here’s the president’s pitch. He wants to give you free money and the Republicans are thwarting him. When George McGovern campaigned on giving every household $1,000, he was laughed out of town as a shameless panderer. President Obama is doing exactly the same — a one-year tax holiday that hands back about $1,000 per middle-class family — but with a little more subtlety.
Obama is also selling it as a job creator. This takes audacity. Even a one-year extension isn’t a tax cut; it’s a tax holiday. A two-month extension is nothing more than a long tax weekend. What employer is going to alter his hiring decisions — whose effects last years — in anticipation of a one-year tax holiday, let alone two months?
This is a $121 billion annual drain on the Treasury that makes a mockery of the Democrats’ reverence for the Social Security trust fund and its inviolability. Obama’s OMB director took Social Security completely off the table in debt-reduction talks under the pretense that Social Security is self-financing. This is pure fiction, because the Treasury supplies whatever shortfalls Social Security faces. But now, with the payroll tax holiday, the administration openly demonstrates bad faith — conceding with its actions that the payroll tax is, after all, interchangeable with other revenues and never actually sequestered to ensure future payments to retirees.
The House Republicans’ rejection of this ridiculous Senate two-month extension was therefore correct on principle and on policy. But this was absolutely the wrong place, the wrong time, to plant the flag. Once Senate Republicans overwhelmingly backed the temporary extension, that part of the fight was lost. Opposing it now is kamikaze politics.
Note the toll it is already taking on Republicans. For three decades Republicans owned the tax issue. Today, Obama leads by five points, a 12-point swing since just early October. The payroll tax ploy has even affected his overall approval rating, now up five points in six weeks to 49 percent.
The Democrats set a trap and the Republicans walked right into it. By rejecting an ostensibly bipartisan “compromise,” the Republican House is being portrayed as obstructionist and, even worse, heartless — willing to raise taxes on the middle class while resolutely opposing any tax increases on the rich.
House Republicans compounded this debacle by begging the Senate to come back and renegotiate the issue, thus entirely conceding the initiative to Majority Leader Harry Reid. But Reid has no incentive to come to the table. Democrats will be happy to see payroll taxes rise on Jan. 1. Every day the White House will hammer home Republican responsibility for the smaller paychecks Americans hold in their hands. Every day the White House will demand, in the name of the suffering middle class, that Republicans return from their sunny vacations and pass a tax-cut extension.
Eventually they will, adding humiliation to mere defeat.
The GOP’s performance nicely reprises that scene in “Animal House” where the marching band turns into a blind alley and row after row of plumed morons plows into a brick wall, crumbling to the ground in an unceremonious heap.
With one difference: House Republicans are unplumed.
Email Charles Krauthammer at email@example.com.