As I’ve said, it doesn’t really look as if the Republicans want to extend the payroll tax cut. The reasons for this are almost certainly tied up with the fact that extending it would prevent a fiscal drag in 2012, meaning that the economy would be in worse shape for the incumbent President in an election year. But they cannot just come out and say that they want to tank the economy to make it easier for candidate Romney or Gingrich. So they have to change the terms of the debate. That’s what Rep. David Schweikert trotted out today.
Unlike other taxes, which go into the general fund after collection, revenue generated by the payroll tax goes directly toward financing Social Security.
Although the president’s payroll tax holiday would keep an estimated $265 billion in American pockets, what must not be lost in this discussion is that these dollars will come directly from debt paid back by U.S. taxpayers because they are owed to the Social Security trust fund.
This in turn increases the nation’s debt because it eventually leads the Treasury to bail out the lost revenue in the Social Security trust fund.
That’s an accurate summary of what would happen. It also represents Republicans, all of a sudden, expressing deep concern for Social Security’s long-run finances, something they have been fairly silent on for, oh, the bulk of the history of the Republican Party. To the extent that there was any talk about the Social Security funding mechanism at all, it was to demonize it as a Ponzi scheme or shriek that it must move away from a defined benefit and toward a privatization scheme. Now, because they’re not interested in passing an extension, the crocodile tears about the trust fund, which in the past they’ve called a mirage, come out.
This is just the fear that many on the left had about using the payroll tax as a stimulus mechanism in the first place. It replaced the Making Work Pay refundable tax credit from the Recovery Act, which did nothing to the Social Security Trust Fund whatsoever and which was actually a better deal at lower incomes, for those making under $20,000 a year. The conceit was that cutting payroll tax would provide more bang for the buck, but that could be dismissed simply by increasing the refundable tax credit. But instead, we got into the payroll tax, which raises all of these knotty issues around Social Security. Plus, it gives Republicans a plausible reason not to extend it.
Which they clearly don’t want to do. Otherwise, they wouldn’t want to include poison pills like changing the authority for the Keystone XL pipeline in the deal. Even with that, John Boehner and the GOP leadership cannot corral the House rank and file. They simply don’t want to an extension this become a reality.
More from Brian Beutler.