Wednesday, February 15, 2012

Your Payroll Taxes Won't Be Going Up After All. Thanks, Obama. I Suppose.

Score one more for the good guys. Maybe.
Congressional negotiators reached a tentative deal Tuesday to extend a payroll tax holiday, unemployment benefits and Medicare payment rates for doctors, while finding more than $50 billion in cuts to reduce the effect on the federal deficit.

While President Obama and congressional leaders publicly jousted over the negotiations, senior Democrats and Republicans worked behind the scenes toward a compromise that would extend the tax and unemployment benefits through the year. A deal also would mean that doctors would not see a drop in rates paid by Medicare, according to senior aides in both parties.

Lawmakers and aides stressed that final details are still being ironed out — including which cuts would be used to finance the unemployment and Medicare provision — but they were optimistic that a broad deal would be announced Wednesday and approved by Friday. Republicans left a meeting Tuesday night in which House Speaker John A. Boehner (R-Ohio) and his leadership team outlined the emerging deal with few dissenters and several key supporters among the sometimes-volatile GOP freshman class.

The major breakthrough in negotiations on the broader package came over the weekend when the lead Republican negotiator, Rep. David Camp (Mich.), informed his Democratic counterpart, Sen. Max Baucus (Mont.), that Republican leaders said they would agree to extend the tax holiday through the end of the year without requiring Democrats to offset the cost. Payroll withholdings, normally 6.2 percent, were lowered to 4.2 percent at the beginning of 2011 after the Obama White House negotiated a compromise tax plan with congressional Republicans.

Without the need to offset the extension, the Camp-Baucus talks had to result in only a little more than $50 billion in offsets to finance the jobless benefits and the Medicare provision. The task became much easier as the numerous budget showdowns of 2011 produced hundreds of billions of dollars in spending cuts intended for much broader deals that never came to fruition, thus giving Baucus and Camp a menu of options from which to find the savings.

On unemployment benefits, which will cost about $30 billion, Democrats were forced into a choice to hit the federal workforce: either another pay freeze or a requirement that workers contribute more to their pension plans. Late Tuesday, a senior Democratic aide suggested that Democrats preferred the increased pension contributions, something Obama has supported. Republicans sought more than $20 billion in savings on health-care programs, including a Medicare payment program to hospitals and a small fund for Obama’s landmark health-care law, while Democrats refused any cuts that would reduce benefits for elderly patients in the health-care program.

In addition, the two sides reached a tentative plan to reform unemployment benefits, reducing the maximum time frame to benefit from the jobless insurance program to 73 weeks in the states with the hardest-hit economies.
I'm not 100% sure how to feel about this one.

On one hand, I'm happy to see that the President didn't buckle to political pressure from the right by including that silly Keystone Pipeline to get the GOP to vote on this. For all their chest thumping, it's somewhat hilarious to watch all those Tea Party freshmen simply become part of the GOP establishment, and now they'll have records to prove it. They were obviously going to do so all along, as anyone with a brain knows you can't possibly raise taxes on the middle class in an election year. So score one for #TeamObama for standing firm and not doing his usual cave-in job. Ditto for making unemployment benefits, and the Medicare payment rates part of this package. Bravo.

On the other hand, I'm still quite curious about this $50B in offset cuts. Where/how this is going to be accomplished seems still a bit vague to me. And as I've said in the past, if we're really and truly in the oppressive deficit/debt crisis we're supposedly in, why is anyone getting a tax cut right now? Why not raise taxes back to the pre-Bush cut levels, and let this payroll tax extension expire as well? That would be political suicide, but the fact that hardly anyone's suggesting it tells me...
A. The debt/deficit problem isn't nearly as big as big as deal as the GOP has made it out to be, and they clearly just created this issue to contrast themselves with Obama with a predictable class warfare tactic.


B. It is actually a big deal, but nobody on either side of the aisle has the political balls to try and do this. Demonizing folks who "don't pay any taxes" or prattling on and on about the insolvency of "entitlement programs" is much easier than just asking everyone to be inconvenienced and refilling the coffers.
I can't call it either way, can you?

Question: Did we really need this tax cut? Is the deficit/debt problem really a serious threat to our nation, or merely a political tactic played by both sides?

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