House Republican Opposition Puts Payroll Tax Cut Deal in Doubt

Never underestimate the capacity of the House Republican caucus to snatch defeat from the jaws of victory.

In this case, the defeat may prove to be a long-term one -- particularly if voters a year from now in November 2012 hold the Tea Party-faction led Republican Party responsible for any failure to extend the payroll tax reduction.

House Speaker John Boehner, R-Ohio, said Sunday on NBC's Meet the Press, that he and fellow House Republicans will now oppose the two-month payroll tax reduction extension that was overwhelmingly approved 89-10 in the Senate on Saturday; the bill keeps the tax that funds Social Security at 4.2 percent for the employee contribution, instead of the normal 6.2 percent.

The House is expected to vote on the payroll tax issue on Monday; it could defeat the bill, or what's more likely, amend the Senate bill or attempt to pass its own version, which would trigger a House-Senate conference committee to reconcile differences.

Further, Democrats in the Senate helped to overwhelmingly pass the bill Saturday despite the fact that the bill contained a GOP change to accelerate the evaluation of the controversial Keystone XL oil pipeline, which would run from Canada to Texas across a key aquifer in the Great Plains. Environmental groups oppose the pipeline.

Boehner's stance Sunday represents a reversal from his Saturday stance, when at that time he had urged his caucus to support the legislation. But as has happened numerous times since the Tea Party-dominated Republican Party retook control of the House in 2011 following the November 2010 election, Boehner caved-in to the conservative faction -- a faction that has been notorious for its opposition to compromise, finding common ground, and resolving an issue facing the nation.

Failure to Extend Payroll Tax Reduction Will Reduce U.S. GDP Growth

Most economists agree that a failure to pass the payroll tax reduction would lower U.S. GDP growth, as the reduction increases take-home income of working class and middle class employees -- two groups likely to put the extra money to use quickly if not immediately, thereby stimulating economic activity. In all, about 160 million Americans would benefit from the payroll tax reduction extension, and most Americans would see a $750 to $1,500 annual tax increase without the reduction extension.

What's more, failure to pass the bill would also jeopardize the extension of unemployment compensation benefits and an effort to prevent a cut in payments to doctors who accept Medicare.

In a Sunday conference call with Boehner, House Republicans said he and his caucus would not support the tax reduction extension because it would increase the deficit without creating jobs, the latter of which most economists say is not the case: most economists argue that the payroll tax reduction extension will stimulate the economy.

The House Republican stance also contradicts the GOP's long-standing stance on tax cuts. Republicans argue that tax cuts stimulate economic activity -- it's a major reason they favor cutting taxes, routinely. For some reason, however, the Republican Party is arguing that the payroll tax reduction in December 2011 is different, but the party has not been able to mount a credible empirical argument to support its contention, and most economists say the party is simply flat-out wrong.

U.S. Sen. Charles E. Schumer, D-N.Y., said Mr. Boehner's comments raise questions about his ability to lead.

This is a test of whether the House Republicans are fit to govern, and it is a make-or-break moment for John Boehner's speakership, Schumer said in a statement, The New York Times reported Sunday. You cannot let a small group at the extreme resort to brinkmanship every time there is a major national issue and try to dictate every move this nation makes.

Political/Public Policy Analysis: In theory, House Republicans could sub a one-year payroll tax reduction extension for the two-month extension the caucus opposes, providing proof for the House GOP's stance that it wants a longer extension. But, given the caucus's track record to-date, that is a naïve analysis of the Tea Party-led caucus' stances in 2011, a year replete with Tea Party-led obstruction, intransigence, and brinkmanship.

Rather, the House GOP most likely opposed the payroll tax reduction as a means to extract either: a) more spending concessions from President Barack Obama and Congressional Democrats and/or b) further obstruct, for the sake of obstruction, hoping that gridlock or other Capitol Hill inaction will slow the economy further, hurting Obama's re-election chances (assuming voters blame the president) or c) both.

Keep in mind that this latest obstruction by the Tea Party-led House GOP occurred after a bipartisan deal was reached in the U.S. Senate, but really, it's nothing new for the Tea Party faction since it was elected to power in the November 2011 election.

In April, Tea Party intransigence and unwillingness to compromise nearly led to a U.S. government shutdown.

In August, Tea Party intransigence and an unwillingness to compromise nearly triggered a U.S. government default -- and the Tea Party's willingness to use brinkmanship and cast aside the national interest to further partisan political goals was a factor in the U.S. government's credit downgrade.

And that has been the Tea Party stance since the faction assumed power in the House in January 2011: use obstruction, brinkmanship and any other tactic available to achieve conservative objectives, even it damages the nation, slows the U.S. economy, and hurts the American people in the process.

Finally, Boehner's reversal on the payroll tax reduction extension shows who is in charge of the GOP House - -the Tea Party, not Boehner -- a sad state of affairs for the caucus, and for the nation.

The payroll tax reduction is now in doubt: in theory, a new bill could emerge if two bill versions are negotiated in a conference committee, assuming the House passes some reduction extension. The more-likely reality is, however, assuming continued House GOP obstruction, that the American people will have to resolve the issue, by voting out of office those who oppose the much-need payroll tax reduction extension.

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