Compromise needed to extend tax cuts, unemployment pay

House Republicans maintain that increasing the top rate for the nation’s highest wage earners would cripple the ability of “job creators” to do what they do best.

Yet there is little evidence that the George W. Bush tax cuts resulted in the creation of jobs, or that the extension of those cuts through the first three years of the Obama administration has created jobs.

So it would seem that the jury is still out on how effective tax cuts at the top are in creating jobs or how much damage would be done by reversing them.

Targeted tax cuts aimed at encouraging people or corporations to invest in the United States — rather than sock the money away or divert it overseas — would seem to hold the most promise for job creation, but Washington doesn’t seem to be very good at hitting targets.

House Speaker John Boehner, R-Ohio, his Majority Leader Eric Cantor, R-Va., and others are now rattling their sabres because the Senate reached an agreement on a tax bill. It’s not an agreement to raise taxes in any way on the rich, but an agreement to maintain a 2 percent tax cut for every working American who pays into Social Security. Unless something is done, just about everyone’s take-home pay will be cut by 2 percentage points Jan. 1, when the 4.2 percent payroll tax reverts to its normal 6.2 percent.

The House passed a one-year extension of the tax cut, but it couldn’t get a majority votes in the Senate because the Republican majority in the House demands spending cuts to cover the cost, while the Democratic majority in the Senate wants to close some tax breaks for the wealthy.

A sign of dysfunction

That the House and Senate — or Republicans and Democrats — couldn’t reach a compromise on this before the 11th hour only shows how dysfunctional Congress has become. Boehner has the votes to pass take-it-or-leave it legislation in the House and expects the Democratic Senate to ratify whatever he wants. If that were the way it was supposed to work, we wouldn’t need two legislative bodies or two parties.

It is unfortunate that this partisan game of chicken has reached the point that the best that could be achieved was the Senate’s two-month extension, which passed on an overwhelmingly bipartisan vote of 92-8. But presumably Senate Democrats and Republicans believe that the two-month extension might finally allow them to agree on a way to pay for the $200 billion cost of the cut. Putting more money in people’s pockets is a good idea, but taking it out of the Social Security Trust Fund at a time when everybody acknowledges that changes in Social Security are inevitable is a bad idea.

A dangerous blame game

Boehner can reject the two-month compromise, but blaming it on Democrats is going to be a hard sell when everyone starts paying higher Social Security withholding taxes in January. And, because of another section of the bill, hundreds of thousands of people in most states will see their unemployment benefits end.

And while questions remain about how much of their tax breaks the wealthy have been pouring into job creation, there is no question that middle class taxpayers and unemployed workers pour their windfalls right back into the economy. The money they spend on food, shelter, transportation and clothing goes into the pockets of small businesses and other working men and women throughout the economy.

Boehner might want to think about that if he intends to head home to Dayton for Christmas without accepting the Senate compromise.