Hypocrisy proves bipartisan in payroll tax debate

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If you were asked to describe, in 10 words or less, the single issue driving the two major political parties in the US today, I imagine you'd say something like this: Republicans never met a tax cut they didn't like; Democrats won't touch entitlement programs, even to make them solvent.

Consider, then, the counterintuitive positions revealed in the current debate on the expiring payroll tax cut. The Democrats appear happy to raid the Social Security trust funds for a second consecutive year while the Republicans have actually found a tax cut they can only swallow with additives!

Let's start with the Democrats. The White House has installed a clock on the top of its homepage, informing us how many days, hours, minutes and seconds remain until the 2 percentage point cut in the employee portion of the payroll tax expires on Dec. 31. There's even a handy-dandy calculator to see how the cut affects you. (The calculator does not accept commas, so enter your salary without them.)

President Barack Obama says the increase in employee-paid payroll taxes (back to 6.2 percent from the current 4.2 percent) will raise the average American family's tax liability by $1,000, which translates to $83.34 per month or $38.46 per paycheck for those who get paid biweekly.

In other words, this is not a lot of money. And while I'm not unsympathetic to those who have to choose between putting food on the table and paying the rent, the typical family is not going to notice a $19.23 reduction in weekly take-home pay. It's "a temporary gimmick, not a long-term solution," as Minnesota Representative Michele Bachmann said Dec. 10 at the ABC News Republican debate in Iowa.

Role reversal

Obama could have embedded the US national debt clock -- $15.1 trillion and ticking -- on the White House website. Even more relevant would have been a link to the 2011 annual report on the status of the Social Security trust funds, which, while lacking the urgency of the countdown to Dec. 31, is a real ticking time bomb for future generations.

The benefits paid by Social Security exceeded taxes received last year for the first time since 1983, according to the trustees report. Prior-year surpluses were never saved. There's no lockbox full of cash for a rainy day, as Al Gore wanted us to believe. The government deposits an IOU in the trust funds and uses the surplus for various purposes.

The $49 billion Social Security deficit in 2010 and the $46 billion one projected for this year will shrink to about $20 billion in years 2012-2014, according to the trustees. It's all downhill from there, with deficits growing along with the number of retiring baby boomers until the fund is exhausted in 2036. Yet Democrats insist we need to extend the payroll tax cut, which will sap an additional $120 billion from the trust funds.

Across the aisle, Republicans who signed a pledge to never- raise-taxes-on-anyone-ever-no-matter-what aren't so sure about this one. That's why House Speaker John Boehner had to lard the bill extending the payroll tax cut (and unemployment benefits) with a provision to accelerate the construction of the Keystone XL oil pipeline from Canada to Texas. Last month, Obama put that project on hold either (take your pick) for environmental review or to appease his base.

Now, to square the circle, House Republicans have passed a measure that Senate Majority Leader Harry Reid said was dead on arrival and Obama threatened to veto because of spending cuts and the oil pipeline add-on.

Hypocritical oath

Republicans are reluctant to admit that the payroll tax cut is the wrong kind of cut. They favor reductions in marginal and capital gains tax rates to encourage work, saving and investment. In their world, tax cuts are an incentive to increase the supply of labor -- one's willingness to work -- not the demand for goods and services.

In order to deflect attention from their philosophical aversion to tax cuts that merely "put money in the pocket of people who will spend it," as Obama is wont to say, Republicans are touting the Keystone pipeline as a "job creator" in an attempt to make the president look indifferent to long-term unemployment with his veto threat.

And that's not all. Earlier this month, Senate Republicans rejected measures that would have paid for the payroll tax cut by imposing a surtax on millionaires. Obama turned that to his advantage, charging tax-cut-loving Republicans with refusing to help the middle class while protecting the wealthy.

Round and round it goes. The two parties are so intent on scoring political points and playing gotcha, they can't even see to what extent their current behavior is countercultural (at least counter to their particular culture).

So the next time you hear someone complain about the lack of bipartisanship in Washington, tell him, nonsense. Hypocrisy is as bipartisan as it gets.

Caroline Baum
Caroline Baum, author of "Just What I Said," is a Bloomberg News columnist. The opinions expressed are her own.

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