As parents across the country scurry to finish Christmas shopping for their families, Congress is quickly trying to deal with a number of tax provisions that expire at the end of the calendar year.
One of the largest of these is a plan to extend a cut to payroll taxes. The legislation was originally passed last year and meant to be in force for 2011 only. Several politicians claim the payroll tax cut is a proven jobs creator. Given the fact that the national unemployment has only ticked down a few tenths of a percentage point this year, that’s debatable.
But putting aside the question of whether Congress should extend this cut, the rhetoric used within the debate highlights three current problems Washington has:
First, lawmakers talking out of both sides of their mouths. For years Democrats have been calling for certain provisions of the 2001 and 2003 tax cuts to be allowed to expire. In the process, they’ve refused to acknowledge this would be a tax increase. But letting the payroll cut expire would be an enormous tax increase, they say. Also the party that has, for years, been skeptical of the stimulating effect of income tax cuts, now says the payroll cut is necessary to stimulate economic growth. Democrats sound as if they are using the same talking points Republicans use to argue for capital gains and dividend tax cut extensions.
Republicans are not much better. Many in the GOP are insisting the extension be “paid for” (because it will reduce Social Security funds, and is the responsible thing to do) but it is a position they didn’t take last year during the payroll tax debate. Some claim this amounts to a Republican “identity crisis.” Perhaps, but it certainly indicates the type of disingenuousness that makes Americans fed up.
The case of the payroll tax cut also reveals a second Washington problem -- that’s one with deadlines. In the good old days, political leaders would run up against deadlines, but at least they tried to find semi-permanent solutions by deadline. As the alternative minimum and payroll tax extensions show, the best taxpayers can hope for are one year patches. (The worst, as the Super Committee showed, is no solution at all.)
This lack of finality to the debates breeds uncertainty. And when you are dealing with things like unsustainable spending and debt, and taxes, that breeds anxiety in the economy. In addition to that, close deadlines allow lawmakers to use issues like the payroll tax cut as political stunts.
Take, for example, the Republican payroll tax proposal. To pay for it, Republicans would freeze public employee pay and reduce the number of unnecessary public employees. With a $15 trillion debt, aren’t these things Congress should be contemplating on their own -- not to pay for something else?
We’ve touched on it a bit, but the third problem is one of temporariness. Washington doesn’t like to commit to fiscal measures for too long -- because it doesn’t want a full accounting of the expense -- so the U.S. has become a nation living in a temporary fiscal state.
Congress has been using temporary budgeting since the mid-1990s. For fiscal year 2011, it took eight different band-aid spending bills to fund the government for a whole year. Since 2001, the temporariness has extended to tax policy.
When the nation began the holiday season last year, Washington was having the exact same debate – but about different tax measures. Mark your calendars for December 2012 -- that’s when Congress will have to decide whether or not to extend -- again -- the provisions in the 2001 and 2003 tax cuts.
I left Capitol Hill five years ago because I felt like a hamster on the wheel. Congress was doing the same thing year after year, not learning lessons and acting responsibly.
It’s time for Congress get off the hamster wheel, it's time for lawmakers to stop using political rhetoric to make up for their missed deadlines and temporary policymaking. It’s time to stop the dysfunction -- and that means making a long-term commitment to real spending and tax reform.
Gretchen K. Hamel is executive director of Public Notice.