February 13, 2012
House Republicans will agree to extend the payroll tax cut for another 10 months without making up for the lost revenue with budget cuts, as they'd previously demanded, reports Bloomberg. We noted this morning that some kind of compromise on the extension seemed likely, with Rep. Paul Ryan giving signs to ABC's This Week that the two parties might actually agree to something. Bloomberg reports that the fact that the Republicans came to the Democrats on this -- though Democrats haven't yet agreed to it -- seems to indicate that they learned their lesson after battling against a two-month extension in December:
The Republican proposal reflects the desire to avoid being blamed for an impasse, as they were for a breakdown in talks that almost caused the tax break to expire at the end of December, said one of the staffers, a Republican leadership aide who spoke on condition of anonymity.
The compromise is bound to annoy budget hawks, but it'll likely have its cheerleaders too. Former vice chairman of the Fed Alan Blinder, for instance, wrote in a Wall Street Journal op-ed Monday that the cut should be extended without spending reductions:
Continuing both policies through the end of this year should be a no-brainer ... Democrats want to cover the cost of the extensions by imposing a surtax on incomes over $1 million and eliminating some corporate tax subsidies. Republicans want to cover the costs by extending the pay freeze on federal workers, trimming some pension benefits, and raising Medicare premiums paid by wealthier seniors.
Here's a suggested compromise: Don't pay for it at all, at least not now. Raising other taxes or cutting other benefits would negate much of the stimulative impact of the payroll tax cut and the unemployment benefits.
February 13, 2012