Snap Fact #106

Post date: Feb 19, 2012 7:34:44 PM

Snap Fact #106


President Obama Check Mates Republicans In Extending Jobless Benefits and Payroll Tax Cuts! 

Yesterday's SNAP-CAP, #105, told the story of the President's earlier (2010) fight to protect hard working Americans who had unfortunately lost their jobs. The issue did not go away. It became the pawn in a cynical chess game being played by congressional Republicans and cost the unemployed and the country so much hardship and damage. In the fall of 2011, President Obama proposed extending the payroll tax cut and added jobless benefits through 2012 as major pillars of his program for stimulating the economy and creating jobs. 

At the time, Speaker of the House John Boehner commented, “Let’s face it, this is an economic relief package, not a bill that is going to grow the economy and create jobs”. The Republican majority in the house cynically blocked the bill from passage. Finally, in an eleventh hour cliff hanger a compromise was reached that no one, with the possible exception of the President, was happy with. Typically, the chess-master was looking many moves down the road. The sides merely exchanged pawns when they agreed to a two month extension with no permanent resolution to the problem.

By February 2012, the most pressing issue in front of Congress was the looming February demise of the extension of the payroll tax holiday which had been passed in late December after the two parties had failed to agree on a number of issues. When negotiations resumed, Republicans and Democrats put forward sharply different proposals for covering the cost of extending the tax cut through the rest of the year. As the deadline again approached it began to look like we were hurtling headlong into another crisis.

The proposed bill not only covered long-term unemployment insurance benefits extension, which Republicans were seeking to rein in sharply, it still featured the payroll tax cuts as well. There was also the so-called “doc fix,’' a measure to head off a 27 percent cut in Medicare payments to doctors.

The talks seemed headed for another irreconcilable impasse, but on Feb. 13, Congressional Republicans unexpectedly, and without explanation, backed down from their ongoing nonnegotiable demand that the payroll tax rollback be paid for with reductions in other programs. This cleared the way for the President's hard won extension of the tax cut for 160 million Americans all the way through the end of 2012.

The following day negotiators struck a tentative deal on the payroll tax that would also cover unemployment benefits and doctors’ reimbursement. Democrats, elated after winning the Republican tax concession after months of clashes, said they had also been able to beat back new conditions that Republicans had wanted on jobless pay, like requiring beneficiaries to seek high school equivalency degrees, and had found middle ground on Republican attempts to significantly reduce the number of weeks in which the unemployed could draw benefits. Republicans did make Democrats pay for the added unemployment benefits through changes to federal pensions.

Under the agreement, the current reduction in the employee’s share of the Social Security payroll tax — to 4.2 percent of wages, from 6.2 percent — would be continued to the end of the year. Revenue lost to the Social Security trust fund would be fully replaced with money from the general fund of the Treasury. After months of impasse, the House has passed a truly bi-partisan bill to extend a payroll tax cut and other provisions affecting millions Americans that were set to expire Feb. 29. 

So why did the Republicans back down? Simple answer: The politics wasn't working out for Republicans. The move underscored the desire of many Republicans (eager to blunt Democratic accusations that they do not support tax cuts for middle-class Americans) to put the fight behind them in an election year.

A little more history: 1 

Last December, inexplicably, Republicans handed President Obama a most beautiful political gift. They extended the president's payroll tax cut and unemployment insurance for only two months rather than the whole year. Why? So they could protect their millionaire friends from a 3% surtax on income over $1 million. So of course, with amazing political malpractice, John Boehner and the Republicans handed to the president and the Democrats a golden goose - the chance to re-argue the case for extending these benefits to help working Americans and Americans looking for work in just two short months, a debate the president and the Democrats have already decidedly won. 

And so, with the two month extention almost up, the Republicans were refusing to agree on any revenue raisers and arguing for cutting critical support from programs for the elderly, poor and job-seekers. The Democrats, led by a reinvigorated Presiden Obama are putting the squeeze on. The result? The Republicans, seeing the political hand writing, resigned from this game on the payroll tax cut; offering to extend it without any pay-fors.

“Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue,” Boehner, House Majority Leader Eric Cantor (R-Va.) and House Majority Whip Kevin McCarthy (R-Calif.) said in a joint statement. What's cuter is that the GOP thinks that it is also playing a nice game of chicken here - they are only offering this deal on the payroll tax relief, but not on the other two critical items - extension of unemployment insurance benefits and preventing a severe cut on Medicare payments (known as a doc fix).

Too bad they can't play chess very well. The White House has not committed to the GOP package. In response the President is on the stump appealing directly to the people, while Congressional Democrats are turning up the heat.

Minority Leader Nancy Pelosi splashed cold water on separating jobless benefits and the doc-fix from the payroll tax holiday. “The Republican plan to decouple the payroll tax jeopardizes both the ability of seniors to see their Medicare doctors and benefits for millions of Americans who lost their jobs,” she said in the statement. “There is no reason all three of these priorities cannot proceed at the same time as both the House and Senate agreed". 

Boehner has agained managed to please no one - leaving him orange-faced. The people who want a payroll tax cut extension also want unemployment benefit to be extended - while angering his "base" (for caving). He won't get any political benefits from holding back unemployment insurance, while Obama will get credit for rescuing the payroll tax cut. Lest anyone doubt the Chess-master's skillful play, his winning gambit was taking the payroll tax cut out of the equation which leaves less to pay for in the remaining package, making an agreement possibly easier to reach.

The latest round in the fight over the payroll tax cut and jobless benefits has been waged since late last year and has taken a political toll on Republicans. Illustrating their reluctance to be seen as blocking a middle-class tax cut, House Republicans removed the major hurdle to the legislation when they agreed that the payroll tax cut — comprising about two-thirds of the measure’s cost — would not have to be paid for with spending cuts.

By a comfortable margin, the House of Representatives on Friday (Feb 17, 2012) passed legislation to extend a two percent payroll tax cut through the end of the year. The bill reflects an agreement between GOP and Democratic leaders in the House and Senate. It also extends emergency unemployment insurance though December, though it reduces the number of weeks in which people looking for work can draw on benefits. And it means that Medicare physicians won’t experience a steep pay cut by extending their reimbursement rates for at least 10 months. Good news for Seniors and middle class Americans!