The payroll tax cut: Why Republicans and Democrats have switched sides.

Who's winning, who's losing, and why.
Aug. 26 2011 6:38 PM

Bad Slasher Movie

The Democrats' sad, stupid, doomed campaign to keep the payroll tax cut.

Illustration by Rob Donelly. Click image to expand.

On Tuesday, as Washington rebuilt itself after a less-than-apocalyptic earthquake, a joke started to circulate on Twitter and Facebook. The popular version went like this: There was just a 5.8 earthquake in Washington. Obama wanted it to be 3.4, but the Republicans wanted 5.8, so he compromised.

David Weigel David Weigel

David Weigel, a former Slate politics reporter, is a reporter for Bloomberg Politics

Funny stuff (unless your name is Pat Robertson). From the tables of Pew polls to the blogs at the Huffington Post, Democrats are yowling about President Obama's habit of giving Republicans most of what they want.

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It's not just policy—there's only so much you can do with John Boehner running the House and Mitch McConnell putting up sandbags in the Senate—it's also politics. The White House's big idea right now is extending, and maybe expanding, the temporary payroll tax cut that knocked the Social Security portion of FICA down from 6.2 percent to 4.2 percent. *

Why do Democrats like this idea? Because it has worked so well so far? According to Jared Bernstein, who was Joe Biden's chief economist when the White House got this cut included in the 2010 tax deal … sort of.

"We don't have great evidence," he says. "But, jeez, another 2 percent on your paycheck has got to help strapped families. In aggregate it was about $110 billion, and many of us believe it helped to offset the increase in gas prices this year."

Bernstein calculates that keeping the tax cut would mean 8.6 percent unemployment by the end of 2012 and that nixing it would mean 8.9 percent. But that's not why Democrats like the idea. No: According to Sam Stein's reporting, and according to a pile of quotes from frantic Democrats, they like the idea because it makes Republicans look like hypocritical jerks. Asking Republicans why they're against it makes them look so awkward. They set a goal for this week: "hammering the hypocrisy of individual members who signed [Grover] Norquist's pledge."

And they hammered away. Rep. Russ Carnahan, D-Mo., one of the Democrats most endangered/doomed by redistricting damned the GOP with "a level of hypocrisy that's hard to get your mind around." ThinkProgress—a project of a nonpartisan think tank, of course—headlined a report "Republicans To Oppose Tax Cut for Working People."

Something is getting lost in the campaign: Why goad Republicans into supporting tax cuts? It's an irritating short-term strategy. What does it get Democrats in the long term if they say this tax cut can't be undone?

"It's completely hapless negotiating!" says Nancy Altman, the co-director of the defend-the-New-Deal-at-all-costs group Social Security Works. "You're taking something the other side wants and then begging them to take it. I'd expect that Republicans would eventually take it, but in exchange for some other concession. What a perfect position to be in, when you're begging me and offering me more if only I'll vote for something I want already."

Altman has an agenda here—her group believes that weakening FICA for any period of time weakens Social Security—but she's not wrong about the Republicans. The point Democrats are making when they trot out this zinger is that Republicans used to support a payroll tax cut. The liberal punditocracy spent part of this week proving it. Jonathan Chait dug up the story of the early 2008 stimulus plan, $300 billion of tax cuts, and found that Rep. Jeb Hensarling, R-Texas—now one of the conservatives on the "supercommittee"—once grooved on the idea. Greg Sargent unsuccessfully but tirelessly tried to get Grover Norquist's Americans for Tax Reform say whether letting the tax cut expire would count as a tax hike and thus violate the group's no-taxes pledge.

Maybe Altman is right, and Republicans are holding out before they vote for this. Or maybe they're sincere, and they realize that this tax cut isn't actually that great. After all, do you remember getting that cut in 2008? Do you remember it doing the economy any good? Of course not: As the former Reagan administration economist and full-time Cassandra Bruce Bartlett says, it "did nothing to stimulate growth."

"All tax relief is not created equal," says Brad Dayspring, House Majority Leader Eric Cantor's spokesman. "If the goal is job creation, we've always believed that there are more effective ways to grow the economy and create jobs than temporary payroll tax relief."

Indeed there are. According to Bartlett and Democrats, one of those ways would be increased government spending. Republicans completely rule that out. Democrats have stopped talking about it. This is the ratchet effect of economics and politics, and it goes in only one direction, as Democrats, unable or unwilling to explain why the economy's still bad, retreat and convince themselves that they're advancing.

Want another example? In 2008, Obama campaigned on a different payroll tax policy—a payroll tax hike on people making more than $250,000. Raise the cap, pull in more revenue from the wealthy, and the Social Security trust fund starts looking like Croesus's guest house. It was an idea Democrats campaigned and won on for years. People who aren't rich like to tax the rich. That's not news.

That particular Obama plan, however, was body-bagged before it got a chance to breathe. Nearly three years later, what's happened to idea of lifting the payroll tax cap? It's been proposed again by Sen. Bernie Sanders of Vermont, the only self-proclaimed socialist in the upper house. When Sanders proposes a tax bill, it's as dead as a teenager who watches that videotape in The Ring. That's the ratchet effect again—a mainstream Democratic idea becomes a fringe idea.

One caveat: It's not really a fringe idea. Sanders's proposal is actually more popular than the one the Democratic establishment has tattooed on its forehead. Last week a Reuters poll asked voters to assess a few different stimulus proposals. Forty-six percent of them liked "raising taxes on wealthy individuals." Only 20 percent liked "extending the payroll tax cut." That's what happens when Democrats get Norquist on the brain: They become obsessed with making Republicans uncomfortable instead of with something that voters like. Or with something that's easier to campaign on. Or with something that works.

Correction, Aug. 30, 2011: This article originally referred to a cut in FICA from 6.2 percent to 4.2 percent. Those percentages represent only the Social Security portion of FICA (with and without the "payroll tax cut"). FICA also includes a Medicare withholding. (Return to the corrected sentence.)

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