How Dare The WSJ Blame The House GOP?

Written by David Frum on Wednesday December 21, 2011

The Wall Street Journal this morning excoriates House Republicans for mishandling the payroll tax holiday:

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

True that. But if anyone is to scold on this score, it should not be the Journal - which is as responsible as any of the House members for the GOP's payroll-tax predicament.

The GOP is in trouble because deep down, Republicans do not want to do the payroll tax holiday. They ignored the idea when it was first floated back in 2009 by conservative economists as an alternative to a spending-side fiscal stimulus. Not until President Obama adopted the idea as his own in 2010 did congressional Republicans grudgingly join in support. In the year-plus since then, Republican talkers have denigrated the holiday as ineffective and worse.

The Journal was very much one of those denigrators, and it repeats the denigration in today's editorial:

No employer is going to hire a worker based on such a small and temporary decrease in employment costs, as this year's tax holiday has demonstrated. The entire exercise is political, but Republicans have thoroughly botched the politics.

So the Journal does not come to this debate with clean hands. The Journal is blaming House Republicans for believing things the Journal itself taught them to believe.

I've been an advocate of the payroll tax holiday for a long time, but I'll concede the Journal this much: the holiday in itself is no silver bullet. It has to be joined by vigorous monetary measures and (sadly but probably) more government infrastructure spending if we are to jolt employment numbers upward.

Yet here again the Journal does not come with clean hands. If the payroll tax holiday is not a sufficient answer of itself, it remains a huge improvement over the various remedies proposed by the Journal, which would actively deepen and prolong the slump: tighter money and large, immediate cuts in government spending.

The Journal also of course as always favors tax cuts too. But not this one. The payroll tax holiday is the rare example of a tax cut the Journal strongly dislikes. In today's editorial, the Journal suggests that its dislike is based on the holiday's temporary nature. Yet the Bush tax cuts of 2001 and 2003 were temporary too, and that time limit did not disqualify them in the Journal's eyes.

I sense a different motive.

The payroll tax holiday depletes the Social Security trust fund. Eventually the money will have to be recouped. How? Republicans fear that the money will be recouped with higher taxes on higher-income earners. They foresee the day when Democrats demand that the fund be replenished either by lifting the cap on payroll taxes--or by some kind of surtax on high earners--or (worst of all!) by merging the Social Security system with general federal revenues and outlays.

I foresee that day myself, and I worry about it. That's a reason that I so strongly favor carbon taxes or consumption taxes or some other form of non-redistributive federal revenue source. The US government of the 21st century will need considerably more money than it collected in the decade of the 2000s, and--RINO though I am--I very much prefer that money be collected in some way other than an increase in the top marginal rate of income tax or a higher capital gains tax rate.

But I can foresee and discuss the problem because--unlike House Republicans--I am not in thrall to another Journal teaching: the claim that the poorer 47% of Americans "pay no tax." This claim rests on denying the existence of payroll taxes altogether. If you deny that payroll taxes exist, it becomes very difficult to discuss the consequences of reducing or remitting them, including some arguably serious long-term consequences.

The Journal's 47% myth ties the tongues of House Republicans and pushes them into a quandary where they cannot speak openly about their concerns about a measure they dislike. They then take refuge in bogus concerns about how the tax cut is to be "paid for"--even as they passionately deny the need to "pay for" any of the tax cuts they favor--and with their own shoelaces thus absurdly tied together, naturally they trip over their own feet.

All that is bad enough. But having tripped over their own feet, it must be very galling for House Republicans then to be jeered at by an editorial page that almost more than any other entity, was the party responsible for the lace-tying in the first place.

It's hard for Republicans to articulate those fears, however, because to do so would require them to relinquish one of the party's central conceits--a conceit propounded by nobody more forcefully than the Journal itself. That is the conceit that 47% of Americans "pay no tax."

That 47% do pay taxes, of course, and the heaviest tax they pay is the payroll tax. Admit that fact, and a favorite talking point--plus a big chunk of the Wall Street Journal editorial page's ideology--goes poof up in smoke.

UPDATE: TPM adds the important point that the Wall Street Journal, America's leading economic newspaper, completely botched the details of the payroll tax holiday.