Economy

Republicans Make Bad Idea Even Worse

SK Ashby
Written by SK Ashby

A payroll tax holiday is a bad idea and bad policy.

It wouldn't lead to significant job creation because there's no consumer or business demand for jobs. It wouldn't put a significant amount of money in the pockets of low to middle-income workers. It would further erode the solvency of Medicare and Social Security.

With all of that said, that doesn't mean congressional Republicans won't find a way to make it worse.

For evidently symbolic reasons, Senate Republicans want to limit the cost of the next and presumably final stimulus bill to an arbitrary value of about $1 trillion so, to that end, they want to structure a payroll tax holiday as a fiscal cliff that will greet the next session of Congress.

Trump has been pushing a payroll tax holiday as part of the next round of COVID-19 relief, but it hasn't been clear exactly how the proposal would be structured.

The provision Republicans are discussing would be structured as a tax deferral, a White House official confirmed. That means payroll taxes will be due at a later date and the break won’t add much to the cost of the overall bill. Lawmakers could waive the payback requirement in future legislation if they’re willing to absorb or offset the cost at that time.

According to the Washington Post, Senate Majority Leader Mitch McConnell's proposal will include an extension of the pandemic unemployment program, but it will be reduced in scope from $600 per week to as low as $200 per week.

The GOP bill won't include any money for cities and states.

The bill is not expected to contain any new aid for states and cities, a demand sought by Democrats that even numerous Republicans and White House officials had appeared open to pursuing, according to someone briefed on the initial plans. The legislation is expected to give state and local governments more flexibility to spend money they were already appropriated. This provision was first reported by Axios. [...]

With a substantial number of conservative Republicans wary of spending too much additional federal money, GOP lawmakers have discussed proposing the federal benefit be cut from an additional $600 per week to between $200 per week and $400 per week. The lower number is viewed as the likelier outcome in their bill, although aides cautioned negotiations are fluid and details remain in flux. McConnell is expected to release the legislation this coming week.

I expected McConnell's bill would be released by the end of today, but it seems possible we won't see it until Thursday or Friday.

The cause for the delay appears to be significant disagreement among Republicans themselves, but McConnell is ultimately to blame for that because he wasted the entire summer. House Democrats passed a stimulus bill almost two months ago and McConnell refused to even talk about a bill until this week.

When McConnell releases his proposal, that will only mark the beginning of negotiations with House Democrats and that means the pandemic unemployment program will expire for millions of people this week.

A second, whole new economic disaster could unfold in the coming weeks because of the Republican party, not the coronavirus.