The only way I can see the payroll tax cut getting extended is if the Democrats remain unified and not fall for some Republican counter-offer that would split their coalition. Right now, they’re standing firm on a tax cut for the working class in exchange for a surtax on millionaires. It’s a good political position. In response, Republicans want to undo the defense trigger for deficit reduction, which the White House has rejected. This would appear to be a compromise, but you’re talking about a tax cut in exchange for avoiding cuts to defense, which seems like a Republican exacta. The Republican coalition is already splitting without such a giveaway. Scott Brown appears to support an unpaid-for tax cut, while Olympia Snowe supports the general policy, though she is not yet willing to give up on the pay-fors.
The fallback position should be an extension of the current payroll tax cut (the bill on the table expands and widens it) with either no offset or an offset like capping war spending and using those savings. But Jim Clyburn exemplifies the cracks in the Democratic coalition over this.
Clyburn said he would make changes in exchange for support to extend the payroll tax cuts.
“I don’t think we’re locked into sequester in its current format. … I don’t think that we should close out negotiating or trying to reach a compromise on anything. That is how our government has operated the past. That’s how our country has gotten to be what it is,” Clyburn said on MSNBC’s “Daily Rundown” Tuesday.
“It won’t be the first time that I’ve been at odds with the White House,” he added. “But I will say this: I believe that when you’re trying to legislate, you try to create an environment within which you solve problems.”
Not surprising that it’s Clyburn showing the cracks. During the Super Committee (of which he was a member), he showed an unusual amount of concern for the defense sequester, specifically citing the military bases in his district as part of his rationale. That sentiment, that we cannot go from a country that spends more on the military than every country on Earth combined to a country that spends slightly less on the military than every country on Earth combined, is prevalent in at least some corners of the Democratic coalition. And with Democrats sounding increasingly desperate about the payroll tax extension, you could see them capitulating to this kind of deal.
However, because that deal would help the economy in the near term, the hardline Republicans who want to win back the White House would have trouble supporting it. So I still think things are up in the air with about a month to go.