January 19, 2021

The Payroll Tax Cut Extension, the Republicans and Mitt Romney (et al.)

Posted on 12. Dec, 2011 by Stephan Helgesen in Economy, Politics

I think I’ve more than shown that I’m willing to criticize certain Members of Congress and members of the Administration alike when they miss the mark on fully resuscitating our wheezing economy and bringing fairness – and full employment – back to the middle class.

Through one and a half Sessions of Congress and through the first three years of the Obama Administration, impactful solutions and responses to the current jobs crisis have too often been kicked down the Washington road for reasons of ideology and political doctrinaire-ness.

We continue to see even indisputably moral responses to hardship – such as extending unemployment benefits, Trade Adjustment Assistance (TAA) and food assistance – rejected by apparently morally bereft Members of Congress, mostly Republicans to be sure but the occasional Democrat as well.

Yet when it comes to the now suddenly seven Republican presidential candidates, to date it’s seemed to me to be largely pointless to expend the energy it would take to call them out on the inanity and insensitivity of their expressed views about creating the staggering 20 million or so new jobs which we need to get back to full real employment.  However, their positions of the last two weeks are so similarly inane and insensitive that the time is nigh, as they say.

Extending the current payroll tax cut or holiday – which is now scheduled to expire on December 31 – for another year is critical, even though there are numerous other complementary, and in some ways more effective, stimulus and job-creation initiatives that should be enacted as well.

The payroll tax has, since 1990, been 12.4%, half paid by the employer and half paid by the employee.  However, effective January 1, 2011 the employee’s share was, for one year, reduced to 4.2%, while the employer’s portion stayed the same at 6.2%.

Now, unless extended, the employee’s share will revert to 6.2% at the end of the year.  The choices in front of Congress – and indirectly in front of Mitt Romney and the other Republicans running to be president – are threefold: (1) let the employee’s cut expire; (2) extend it for another year as is, to be ‘paid for’ by taxing in an overall similar amount those wealthiest taxpayers who make more than $1 million a year; or (3) extend the cut while reducing the employer’s portion also down to 4.2%.

Something on the order of 160 million taxpayers would be the beneficiary of a payroll tax cut extension, with a benefit for the typical family of four of more than $1,000, and of these millions of taxpayers, only about 350,000 or so would be thought to be ‘wealthy’.

These ‘160-million-minus-350,000’ are women and men who would almost immediately flow this benefit back into the economy, and while I am skeptical of assertions that a lot of permanent new jobs would be created by this extension, it is indisputable that there would be very positive ‘ripple effects’ to the overall economy which could forestall any new job losses.  So whether your cup of tea is economic or moral or both, a payroll tax cut extension should be Item Number One for this Congress, its anticipated continued dysfunction notwithstanding.

And the Democrats in Congress who favor the extension have very sensitively coupled their extension proposal with a commensurate tax increase on those 350,000 taxpayers with more than $1 million in annual earnings.  The one-year extension, including applying it to the employers’ portion as well plus a separate tax credit for small business, would cost $265 billion.  The so-called surtax on the extremely wealthy would raise $268 billion over 10 years (Jackie Calmes, New York Times, 12-01-11).

The Republicans, however, are almost uniformly outspoken against the extension, whether they are in Congress, running for Congress or running to be president.  They say that it’s “sacrificing the bedrock Republican principle that new expenditures be paid for with offsetting budget cuts.”

This harsh view between sensitively balancing “cuts” and “new revenues” can really be no surprise. All of the Republican presidential candidates, for example, have shown that they are distinctly out of touch with the fact that responsible emergency measures are needed right now to keep the middle class afloat.  Mr. Romney continually says that, “unemployment benefits…actually serve to discourage some individuals from taking jobs.”

Mr. Romney’s infamous line is that, “corporations are people.”  Of course, Mr. Romney, corporations are never unemployed people.  Unemployment is obviously not in your realm of consciousness, even though today it preoccupies nearly every waking moment for millions of American workers.

It shouldn’t surprise anyone, however, that Mr. Romney would so readily put down America’s unemployed and underemployed.  This is a man who made his very considerable personal fortune – estimated by his own campaign to be “between $190 and $250 million” – first by advising clients of Bain and Company to lay off employees and later, as the senior-most executive of Bain Capital-owned companies, by demanding such layoffs.

Mr. Romney’s responses to the economic crisis suggest that if elected president he would precede to “Bain-ize” America.  We should expect aggressive cuts in spending (the middle class social safety net be damned), even more real unemployment and little productive investment in infrastructure or otherwise.

And when all this cutting to the bone fails to produce an economic recovery, look for Mr. Romney to try the governmental equivalent of breaking the company up and selling its pieces:  i.e., mass privatization.  President Bush brought us the ill-advised “ownership society” – a President Romney would give us the far worse “outsourced society.”

This article was submitted by Leo Hindery Jr. who is chair of the US Economy/Smart Globalization Initiative at the New America Foundation, co-chair (with Leo Gerard) of The Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media, and is currently an investor in media companies.




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