The New Payroll Tax Strategy

Written by Steve Bell on Monday December 12, 2011

House Republicans have made a bid to boldly reverse their public relations disadvantage as gridlock over the extension of the payroll tax holiday and other legislation vital to the economy continues.

For the past month or more, Republicans had been scolded as the bastion of the rich and privileged. Democrats wanted to increase taxes on the successful, using those new taxes to continue long-term unemployment insurance, a broadened payroll tax holiday, and to insure that health care providers under Medicare don’t take an overnight 27 per cent cut in payment for services.

Republicans seemed unable to find a formula that voters could relate to, especially with media focus on the “Occupy” movement and the 1% versus 99% rhetoric of President Obama and other Democrats.

Now, the House GOP has published its plan to reform unemployment insurance, continue the present payroll tax holiday, and prevent the cuts for doctors and hospitals under Medicare: and it has begun to change the dynamic of the issue.

Key to the Jiu jitsu is the Keystone XL Pipeline. That project promises not only to make the United States less dependent on imported oil from hostile nations, but to employ as many as 20,000 workers. That jobs number has activated labor unions whose members would find employment at excellent wages on the pipeline. But the professional environmental community has rushed to condemn the pipeline on any number of rationales, but for only one real reason: they want to put pressure on the President to move further in their direction. Obama, to his credit, has not been as malleable as the environmental community in Washington, D.C., hoped for, even going as far as nixing an emissions regulation timeline that his Environmental Protection Agency promulgated.

While it is true that the President threw a sop to the environmentalists with his decision to delay the Keystone XL decision until after next year’s Presidential election, he also made an accurate political assessment. Most of the states impacted by the actual construction of Keystone XL are likely to be Republican states in November, 2012. Those states who depend upon coal as a critical source of jobs are essential for the President (Ohio, Pennsylvania, West Virginia, Virginia, and others). So, make the coal folks and environmentalists happy, and let the central Midwest states go. While the Teamsters Union has endorsed a decision on Keystone XL as soon as possible, the President knows that the union’s political clout will be dependably in his corner next November.

But by making the dynamic jobs versus tax increases, Republicans may re-gain some ground. Certainly, the bill produced by the House GOP allows deficit hawks, who also must show concern for unemployment, a way to change the conversation.

House Speaker John Boehner and his team will pass the bill and watch as the Senate struggles to come up with an alternative. This could mean that it would be the Democrats who scuttle a jobs and tax cut bill, not Republicans.

Not bad for a week’s work.