U.S. payroll tax fight shows faux fiscal restraint

February 14, 2012

By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The fight over U.S. payroll taxes just became exhibit A in political style over substance. Republicans in Congress, who have pounded the table on deficit reduction since last summer’s bruising debt battle, have backed down on a demand that spending be slashed to cover the cost of extending the tax cut. To let it ride for another 10 months will cost $100 billion. So much for fiscal discipline.

It was bad enough when legislators leaned on seized mortgage backers Fannie Mae and Freddie Mac last December to enable 160 million American workers to keep paying a rate of 4.2 percent of their wages, instead of 6.2 percent, into the Social Security fund for a couple of extra months. Now, it’s about to get worse.

Last year, when Republicans refused to raise the nation’s debt ceiling unless future deficits were shrunk, it led to a “super-committee” tasked with finding a way to lop off at least $1.2 trillion from future deficits. The group, predictably, failed. Instead, $1 trillion was automatically cut – a figure that dips to $900 billion if the payroll tax cut is extended.

It’s easy to write this off as election-year politics, but that would neglect the deeper dogma at work. The GOP pledge not to raise taxes obviously trumps any rhetoric around the deficits that have been averaging $1.3 trillion for four years running.

Of course, the Democrats aren’t acting any more responsibly. They’re happy to extend the payroll-tax cut without paying for it, too. And though willing to slash some spending elsewhere, Barack Obama’s party is still unwilling to tackle the real problem: safety-net programs. This was evidenced most recently by the president’s budget plan on Monday.

Despite losing its AAA credit rating, the United States isn’t in any real trouble yet. Its debt held by the public is about 70 percent of GDP – well below Greece’s 160 percent. But America’s ratio is also nearly double what it was just four years ago. The payroll tax fight only goes to show just how little political will there is in Washington, just as in many other capital cities around the world, to seriously address the problem.

Comments

It’s time to fight America as it is now. American Airlines is “outsourcing” their maintenance, according their spokesman, and laying off thousands of long-time workers. Wal-mart started the outsourcing movement. There are no tires or copiers or DVDs made in America anymore. Clothing and shoes are not made here, save some of the New Balance, but not all. Men are made to pay child support to the state because of criminal females, who should be in jail themselves. State Attorney Generals should be shot for allowing the practice of collecting money in the name of child support. Fight, fight, fight.

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