Did the Republicans suffer a disastrous and humiliating defeat when they “caved in” and agreed on December 22 to accept the two-month extension of the payroll tax holiday that had been passed in the Senate with strong bi-partisan support? The Democrats and their mainstream media allies were high-fiving and gloating about an early Christmas. Chris Matthews called it a “rub it in their face moment.” In this instance, even many in the conservative media were heaping criticism on the way the Republicans, particularly the House GOP, handled this matter.
The Wall Street Journal editorial page came down hard: “The GOP leaders have somehow managed the remarkable feat of being blamed for opposing a one-year extension of a tax holiday that they are surely going to pass. This is no easy double play…Republicans have also achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter, although he’s spent most of his Presidency promoting tax increases and he would hit the economy with one of the largest tax increases ever in 2013. This should be impossible.”
There is no question about it. In terms of coordination between the Republican leadership in the House and Senate, this was a blunder, which allowed President Obama to seize the stage as if he and the Democrats were the party advocating tax cuts for the middle class, while the Republicans were standing against such cuts, and ergo, against middle class working people.
The columnist Charles Krauthammer wrote, “making economic sense is not the point. The tax-holiday extension—presumably to be negotiated next year into a 12-month extension—is the perfect campaign ploy: an election-year bribe that has the additional virtue of seizing the tax issue for the Democrats.” He added that “The House Republicans’ initial rejection of this two-month extension was therefore correct on principle and on policy. But this was absolutely the wrong place, the wrong time, to plant the flag. Once Senate Republicans overwhelmingly backed the temporary extension, that part of the fight was lost. Opposing it became kamikaze politics.”
That may be true, but in terms of substance, and even long-term perception, was it really such a victory for Obama and the Democrats? Was it really such a defeat for Speaker of the House John Boehner (R-OH) and the House Republicans? If the media get their way, then the answer will be yes. But it’s worth taking a look a little deeper to see what happened during the process, and the nature of the Democrats’ victory.
One person who caved, though the media hardly took note, was President Obama, who had insisted on December 7 that “Any effort to tie Keystone to the payroll tax cut, I will reject. So everybody can be on notice.” He was referring to a decision on the proposed $7 billion, 2,100 mile Keystone oil pipeline from Canada down to U.S. Gulf Coast refineries that he had attempted to postpone until after the upcoming November election so as not to offend either of two constituencies with a direct interest in his decision—Big Labor and radical environmentalists. He was hoping to avoid angering either group before the November election, but now, according to the agreement, he has to make a decision within two months, well before the election. Obama also said that he wanted the tax-holiday extension for one year, which is what he said when he originally proposed it in 2010, and that it had to include the millionaire/billionaire tax increase to pay for it. But he then agreed instead to a two-month extension without the millionaire’s tax.
Defending a Two-Month Extension
Why a two month extension? Because it gives Congress more time to come up with a deal, with the added advantage of dividing the Republicans. What the House Republicans were calling for was for the two versions of the payroll tax holiday extension to be reconciled in a conference committee, the typical way that legislation is worked. Then a bill comes out and both chambers of Congress vote on it. But the Democrats wanted no part of that, though they finally agreed to a conference between the House and Senate, but only if the two-month extension was passed.
Just before the House GOP agreed to the two-month extension, Joe Scarborough, former Republican congressman and host of MSNBC’s Morning Joe, asked Sen. Chuck Schumer (D-NY) if this two-month extension made any economic sense. Schumer replied: “If we get the two-month extension, we will be able to get it done for a year because the American people so much want this, that when it comes February and you don’t have a government shutdown occurring at the same time, they will put enough pressure that we will be for it. The two-month extension is the only way to get a year extension. If they pass the two-month extension, I will be the first person to be on a plane to sit down and negotiate the rest of the year and we will get it done.”
In light of the failures of the past year to reach meaningful agreements, it is hard to see the basis for Schumer’s optimism, if you want to call it that. In 2011, Congress took no action on the Simpson-Bowles commission recommendations. President Obama had initiated the commission but refused to support their recommendations. Most people said they liked parts of it, but it was structured as an all or nothing deal. The clash over the debt-ceiling hike in August resulted in an agreement to “cut” $900 billion over a decade, and called for a supercommittee to find an additional $1.2 trillion by Thanksgiving, to be voted on by Christmas, or automatic cuts totaling that amount would occur, half from defense, half from domestic discretionary spending. No agreement was reached, which as Investor’s Business Daily (IBD) pointed out, was a success for Republicans who “stood firm against new taxes and got what they set out to achieve: deficit reduction that relies 100% on spending cuts.”
Added IBD, “Consider what ‘success’ would have looked like: a significant boost in taxes today in exchange for virtually meaningless spending ‘cuts’ spread out over a decade.” They displayed a chart that showed that on our current spending trajectory, the cuts of $1.2 trillion over a decade, or approximately $120 billion a year, would mean that in a decade from now, instead of spending about $5.4 trillion a year we would be spending about $5.3 trillion a year. Today we’re spending about $3.7 trillion a year. Cuts don’t really mean cuts. They mean we will spend slightly less than we otherwise would if we stay on our current reckless path.
When the subject arose of Congress revoking the automatic triggers so we wouldn’t have to cut defense spending any more than we already have, cuts which Secretary of Defense Leon Panetta said would be “devastating,” Obama was adamant. He said there would be “no easy off-ramp” to avoid the triggers if the supercommittee couldn’t reach agreement, and he would veto it.
During a discussion about this on MSNBC, Jared Bernstein, now an MSNBC contributor, but until recently the chief economist and economic adviser to Vice President Biden, defended Obama’s decision to refuse to consider changing the triggers. He said that “if we’re going to go with the sequester, the automatic cuts, we need to stick to the framework. We can’t poach from the non-discretionary side.” On the other side was Steve Moore, senior economics writer and editorial board member of The Wall Street Journal, who asked Bernstein, “Even if it’s going to jeopardize our national security you think we should make those cuts?” Bernstein replied, “Yeah, absolutely.” Moore replied, “Wow.” While Bernstein was not still officially speaking for the Obama administration when he said that, this was a classic gaffe, meaning he inadvertently spoke the truth in presenting the administration’s viewpoint.
IBD suggests that the automatic cuts won’t really hurt the Department of Defense that badly. They said “the cuts don’t kick in until next October and would amount to only $33 billion that fiscal year. This would still leave defense with $5 billion more than it had in 2010 and $72 billion more than in 2008. And over the next 10 years, its budget will still climb 18%. Plus, Congress can always adjust that spending if needed.”
During the time that Boehner and the House Republicans were refusing to go along with the two-month extension, President Obama invited people to share via a White House website what the $40 per paycheck would mean to their lives. He then surrounded himself with a group of people who were said to be among those who responded to the website, each with a sad story of what that $40 per paycheck would cause them to do without, ranging from pizza parties with their kids to trips to visit ailing relatives. This was shameless demagoguery, in light of the fact that the Republicans had passed the one-year tax holiday extension, which is what Obama had called for, and which the Democrat-controlled Senate turned down. Instead the Senate voted for the two-month extension, said “my way or the highway” and left town in time for Christmas.
What the Media Didn’t Tell You
Reports suggested that the big issue between the two parties was the question of how to pay for the “tax cuts.” But there were numerous other issues as well. Rep. John Culberson (R-TX) went to the floor of the House and cited some other problems House Republicans had with the Senate version of the bill, namely items that had been taken out. He listed those items in a statement he released through his office on December 20. For example:
“The House bill requires people who get an unemployment check to prove they are looking for work or completing a GED or college degree. The Senate took this out.
“The House bill permits business owners to immediately expense 100 percent of new investments, dollar-for-dollar, in the current year tax return. The Senate took this out.
“The House bill protects American industrial boiler manufacturers from being shut down by unachievable Obama EPA restrictions. The Senate took this out.
“The House bill stops welfare recipients from using their Lone Star-type cards at ATM machines in casinos, strip clubs and liquor stores. The Senate took this out.
“The House bill cuts off unemployment and food stamps payments to millionaires. The Senate took this out.
“The House bill requires people to produce a Social Security number before receiving a refundable child tax credit. The Senate took this out.
“The House bill protects doctors from a 27 percent cut in Medicare reimbursement payments for two years. The Senate only protects them for two months.
“These are dramatic and important differences that are unacceptable under any common sense standard. I agree with Speaker Boehner that we should always do the right thing for the right reason. The House bill is the right thing for the right reason.”
Culberson concluded, “We must follow the rules everyone learned in Civics 101. When there is a difference in the bills in the House and the Senate, we go to Conference to work them out as soon as possible.”
Do-Nothing Congress?—Or Senate?
The week Obama took office in 2009, the average price for a gallon of regular gasoline was $1.83. At the end of 2011, the average price was approximately $3.25. How many pizza parties will that cost families on the brink of poverty? His efforts to help “underwater” homeowners, people with mortgages worth more than the value of their house, have resulted in the housing market never quite hitting bottom and remaining very depressed. Obama has resisted opportunities for tax reform that would lower rates and end most tax loopholes, all because he is determined to raise taxes on “the rich,” on the “millionaires and billionaires.”
In reality it is the Democrats in the Senate who have obstructed and played the most cynical politics. Not only have they refused to even vote on some 15 jobs bills the House has passed and sent over, they haven’t passed a budget, as required by law, in over 900 days. When Joe Scarborough asked Sen. Dick Durbin (D-IL) how he answers the Republican criticism that it is in fact the Democrats in the Senate who are dysfunctional, Durbin initially said that they are helpless because they need 60 votes to stop a filibuster. Scarborough pointed out that they can pass a budget out of the Senate Budget Committee to demonstrate their priorities, to which Durbin quietly conceded, “I can’t argue the point.”
If the Media Would Just Tell the Truth
This latest controversy has been media driven. If they chose to tell the truth about what is going on here, and the damaging effects the Obama policies are having—adding about $1.5 trillion in new debt each year, plus the impact of burdensome regulations—they know it would severely damage his chances for re-election. Instead they focus primarily on one figure, the unemployment rate, which recently jumped from 9 percent to 8.6 percent while more people dropped out of the job market than got jobs. In other words, if people are discouraged and quit looking for jobs, they are no longer counted among the unemployed. That can lower the unemployment rate, which is paradoxically viewed as a positive indicator. The magic number for Obama is said to be 8 percent, regardless of how the books are cooked to achieve that number, which would permit him to claim how much the economy has improved, and for the media to swoon in approval.
The most transparent lie is that the Republicans aren’t for tax cuts for the middle class, but the Democrats are. Actually most Republicans are for tax reform, meaning lower rates for everyone and fewer deductions, because they believe that will stimulate the economy and cause it to grow. The “tax cut” that is now in effect for two months will actually end up costing the so-called Social Security trust fund some $200 billion. That trust fund, according to IBD, is “an accounting fiction given the bad shape it’s in,” and this additional drain was “a shame, a disgrace, a political raid to buy votes in the next election.
Watching the gamesmanship that passes as governance has become a depressing pastime. The debt ceiling “crisis” from last August seems a distant memory, and the collapse of the so-called Supercommittee a mere annoyance. Today the country is focused on getting in to the new year with a one-year extension of a tax holiday put into place a year ago. President Obama is calling it a tax cut for 160 million middle class people that the evil House Republicans are determined to block because all they care about are the millionaires, billionaires and big corporations. In the meantime, nothing is getting done, and it seems like that is exactly what Obama wants, an issue to run on for his re-election bid. He knows he can’t run on his economic record.
A Little Candor at MSNBC
Obama has shown again he has no interest in bringing the leaders of the parties together to solve problems. He instead attempts to rile up his base to achieve victory. Jon Meacham, a former Newsweek editor and regular on Morning Joe, recently stated his view that President Obama “doesn’t particularly like people, and politicians who don’t like people are kind of in the wrong business.”
Even Chris Matthews suggested this recently, saying Obama doesn’t talk to people in Congress, on either side of the aisle. “He doesn’t like their company,” said Matthews, one of Obama’s biggest supporters in the media, who is constantly belittling and ridiculing conservatives and Republicans.
With Obama’s approval numbers up over the last month or so, his supporters are feeling emboldened by their belief that they have the Republicans on the run. The Democrats may have won this round in terms of public perception, but with this issue of extending the payroll tax holiday being revisited soon, a new debt-ceiling hike on the table, a state of the union address and presidential primaries taking front and center, it is still anybody’s guess how all this is going to turn out.â€¢
Roger Aronoff is the Editor of Accuracy in Media, and can be contacted at [email protected].