Payroll Tax Cut: Victory for Obama?

It was in all the headlines… Republicans cave! Its a huge victory for the President! Republicans hand Democrats early Christmas present! Republicans hurt electoral chances in 2012!… etc., etc.

Is that true? Just what did Democrats and Republicans agree to? Was this a victory for the President and Democrats? Who were the winners? Who were the losers?

There is a lot more to this payroll tax cut thingy than just the veneer of sound-bite journalism we’ve been hearing lately.

Its time to peal off the veneer and show what knee-jerk pundits overlooked.

The Losers: The Economy and the American People

Of this much we can be certain. The American people and the economy are the big losers.

There is no reason, economic or otherwise, that Congress should ever pass a economic recovery package good for just two months and $80 in a voter’s bank account.

What business can make hiring decisions based on that? None!

But that is what Congress did. We’ll be right back haggling again next month.

That anyone claims victory for such Christmas folly stretches the limits of credibility. Only the most ardent progressive and a know-nothing media calls this a victory for anyone.

Everyone else knows better.

The President’s Original Proposal

With much fanfare in a nationally televised speech last August, the President proposed his “American Jobs Act of 2011 (S.1549)“. The President then went on a national campaign tour calling on Congress to quickly “Pass this jobs bill. Pass it now!”

Back then it wasn’t just for a payroll tax cut. It was a massive $457 billion spending bill… a 2012 version of the “stimulus” package. The payroll tax cut was the centerpiece of the legislation.

Here is what you didn’t read in the New York Times or hear on CNN during recent trumpeting of a Democratic victory…

The Event Chronology

The President’s original jobs bill was introduced by Senate Majority Leader Harry Reid(D-NV) on 9/13/2011 and promptly ignored. It never even got a vote.

Reid then re-introduced a different, slightly more expensive version – S.1660 – on 10/5/2011 that got shot down on 10/11/2011 by the full Senate in a partisan vote.

Democrats then decided to introduce the President’s jobs bill in manageable pieces. President Obama explained the approach in Millers Creek, North Carolina on 11/17/2011:

Were going to give them (Republicans) another chance. I think, maybe the first time because we had it all in one bill; maybe, they (Republicans) didn’t study it properly. Maybe they didn’t know what they were voting against.

A word to the wise, Mr. President… talk like that does not unite people. It divides them.

Senator Robert Casey(D-PA) then introduced just the payroll tax portion of President Obama’s jobs bill paid for by a permanent millionaire’s tax “surcharge” and called it the “Middle Class Tax Cut Act of 2011 (S.1917)“.

Without even a CBO cost analysis it was voted on and, it too, was reject by the full Senate.

After that the President’s jobs bill was whittled down to practically nothing by both political parties in both houses of Congress.

Ultimately, here is what the President won:

  • 1/12th of his proposed payroll tax cut for 2012
  • 1/3rd of his proposed UI benefits extension for 2012

Here is what the President lost:

  • Spending for State stabilization funds to retain teachers and first responders
  • Spending for a large reemployment services plan
  • Spending for more education programs for the unemployed
  • Spending for transportation and infrastructure projects
  • Business tax credit for increased payroll and other business relief
  • Veterans hiring preferences
  • The millionaire’s tax to pay for it all

Democrats and Republicans: Winners and Losers

In the end, here is what Congressional Democrats won (HR 3630):

  • 2/3rds of their proposed payroll tax cut
  • A 2-month extension of the current 2011 payroll tax cut
  • Some health care provisions
  • A fee increase on home mortgages to pay for everything

Here is what Congressional Democrats lost:

  • An increase in the payroll tax deduction for 2012
  • The millionaire’s tax
  • Unwarranted unemployment compensation to millionaires
  • Unwarranted nutritional benefits to millionaires

Yup, that’s right! Some millionaires collect unemployment benefits and get food stamps!

Here is what Congressional Republicans won:

  • An extension of the current 2011 payroll tax holiday
  • Keystone Pipeline Decision Speedup
  • An extension of UI benefits
  • An extension of 27.4% Medicare doctor payments
  • Other health care provisions
  • Agreement for a House-Senate conference committee to resolve differences

Here is what Congressional Republicans lost:

  • Less than a full year extension of the payroll tax holiday
  • Longer than a 2-month extension of UI benefits
  • EPA regulatory reform
  • Extension of business bonus depreciation
  • Unemployment compensation reforms
  • Many spending cuts to offset the cost of the bill

It should be noted that Republicans get credit for UI benefits and the Medicare doctor payment extension that Democrats obviously support. The reason is that Democrats never included either of them in their payroll tax extension bills.


In the final analysis, Republicans won the big ticket concessions:

  • The payroll tax holiday was held to 2011 levels
  • No millionaire’s tax
  • The Keystone XL Pipeline
  • UI and Medicare benefits they proposed
  • A commitment for a House-Senate conference committee

The Democrats won this:

  • The 2-month extension limit for everything
  • Higher home mortgage fees
  • Minor health care inclusions

President Obama was literally left out of Congressional decision making. The President’s $457 billion “American Jobs Act of 2011” is but a faded memory.

Many if not most of the President’s proposals could have been passed if they had been paid for through spending cuts rather than a tax increase. But Republicans and Democrats could not bring themselves to bend that much.

Clearly, both Republicans and Democrats didn’t get things they wanted. That means the whole can of worms will be re-hashed all over again in a few weeks.

When the scabs are re-opened and bickering begins anew House Republicans trying to hold out for a full year extension of the payroll tax cut won’t look like the losers they were called last week.

Soo… Who do you think won? Who do you think lost?



Other related Social Security/payroll tax holiday articles can be found here:

Payroll Tax Cut: How Many Jobs?
-Azleader, Inform The Pundits!, 12/21/2011

2-Month Payroll Tax Cut Extension – Huh? What??
-Azleader, Inform The Pundits!, 12/19/2011

2012 Payroll Tax Cut Holiday Extension – Democrats vs. Republicans
-Azleader, Inform The Pundits!, 12/15/2011

Payroll Taxes: Good News/Bad News
-Azleader, Inform The Pundits!, 12/9/2011

Payroll Taxes… Change of Venue
-Azleader, Inform The Pundits!, 11/22/2011

The Systemic Demise of Social Security
-Azleader, Inform The Pundits!, 11/15/2011

President Obama’s Jobs Proposals
-Azleader, Inform The Pundits!, 9/1/2011

Don’t Extend the Payroll Tax Holiday
-Azleader, Inform The Pundits!, 8/21/2011

Extend the Payroll Tax Cut Holiday… into 2012?
-Azleader, Inform The Pundits!, 7/1/2011


About azleader

Learning to see life more clearly... one image at a time!

Posted on Dec 27, 2011, in 2012 Elections, Economy, Election, Job Creation, Jobs, Payroll tax, payroll tax cut, Politics, Social Security, Taxes, U.S. Economy. Bookmark the permalink. 1 Comment.

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