House And Senate Lock In New, Higher-Stakes Fight Over The Payroll Tax Cut

December 23, 2011 5:06 a.m.

The end of the payroll tax cut standoff couldn’t have been more different from the heat of it: quick, noiseless, drama free.

Without a single objection, the House and Senate passed a two-month extension of the payroll tax cut — a bill that very closely mirrored the compromise House Republicans had roundly rejected just one week ago. There wasn’t even a recorded vote.

It would be a huge mistake, though, to treat Friday’s smooth sailing as a harbinger of the payroll tax fight to come.After a clumsy evolution by the GOP, both parties now agree that the payroll tax cut will have to be renewed again by the end of February, through at least the end of 2012. Same goes for expiring unemployment and Medicare payment provisions. But those are expensive items. And that means at the very least a tough fight between the parties over how to pay for them.

In a press conference Friday morning, Senate Majority Leader Harry Reid (D-NV) indicated that Democrats would put a proposed millionaires tax back on the negotiating table. “There’s nothing off the table — everything’s on the table. And of course, you know, I’ve talked to Senate Republicans, plural, who think that there should be a fair tax on rich people.”

On MSNBC earlier Friday morning, Rep. Chris Van Hollen (D-MD) suggested Dems would renew their push to pay for the extensions by raising taxes on corporations, and fight GOP efforts to use the provisions as an opportunity to cut Medicare.

“I heard Eric Cantor at one point say the parties were really close on the one year deal,” Van Hollen said. “That’s just not the case. Republicans continue to object to some of the methods we want to pay for this. We want to pay for it by closing corporate tax loopholes. I mean you’ve got a corporate jet loophole, you’ve got oil and gas subsidies that we think can be closed. So you’ve got that aspect of it. Republicans have proposed to raise Medicare premiums on seniors. … When it came to federal employees like the folks at the CIA who tracked down Osama bin Laden, they want to cut their pensions.”

And that’s just the financing. Because the GOP didn’t really want to extend the payroll tax cut to begin with, Republicans used its looming expiration as an opening to push for controversial policy riders, including the one they secured that will force the Obama administration to expedite a decision on the Keystone XL pipeline. This narrow win, however, was essentially the root of the GOP’s surrender — and it’s plausible they’ll learn from their mistakes and avoid the temptation to engage in this sort of hostage taking. We’ll see. Cautiousness and timidity aren’t really the House GOP’s hallmark.

In the final analysis, the answer to that question will determine how lasting the impact of the winter tax fight will be. If a chastened GOP majority recognizes their error, stops second-guessing Speaker John Boehner, and decides not to put up much of a fight, the Christmas standoff will be more easily forgotten. If, on the other hand, the same thing plays out all over again, Democrats will retain the upper hand, and the implications — for the economy, for the 2012 election, for Boehner’s speakership — will be enormous.

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