Will the GOP Drop the Ball on the Payroll Tax Cut?

Paul Krugman thinks the tax deal hurts Obama's re-election chances. But a 2011 fight over the payroll tax could lead the president to a big political victory.

Paul Krugman thinks the tax deal hurts President Obama's chances of re-election.

The Democratic parts of the deal will be on the verge of expiring [at the end of 2011], while the Republican parts will have another year to run. Won’t that put the Dems in a desperate position? Won’t Obama be strongly tempted to make further big concessions to get something to boost the economy for another year?

This seems to me upside down. President Obama will have an issue to advance in 2011: renewal of the payroll tax cut. Meanwhile the major positive item in the Republican domestic agenda - the renewal of the Bush tax cuts - has been taken off the table until after 2012. Obama can stage a big fight over the renewal of the payroll tax cut. Republicans will likely have to yield. Obama will have a big political victory and another round of stimulus.

How to ensure that Krugman's prophecy comes true? Republicans need to make the payroll tax cut issue their own. They missed the chance to do so in the last Congress, but it's not too late. And yes, down the road the payroll tax revenue will have to be replaced by some other source. But that's a feature, not a bug: an opportunity to advance the Republican ideal of lower taxes on work, saving and investment, by shifting to higher taxes on consumption and pollution.