Payroll Tax Extension Will Be Only Hostage-Taking Opportunity for GOP in 2012

And taking the payroll tax extension hostage may not be as likely as it seems either.

The most important thing you need to consider when thinking about what’s ahead on the budget, spending, and taxes in Washington in 2012 is that, even though it’s an election year and the stakes will be higher, there will be dramatically less opportunities for the type of Perils of Pauline cliff hangers that were frustratingly routine in 2011.

Actually, there will only be one until next fall: the possible extension of the payroll tax cut at the end of February…and even that probably won’t be the do-what-I-say-or-the-government-gets-it kind of showdown that we saw over and over and over again this year.

It’s not clear whether it was an intentional strategy by the White House or, like Congress not being in session over the next few weeks when a debt ceiling increase disapproval resolution needed to be considered, inadvertent good luck.

But the most important outcome of this year’s continuously torturous negotiations on everything having to do with federal spending, revenues, the deficit, and debt may well be that, except for the payroll tax cut extension, all of the issues were settled either through the start of fiscal 2013 on October 1 or until after the election.

And that will take away all but one of what congressional Republicans used this year to try to force congressional Democrats and the White House to do what they wanted.

Although there were some indications immediately after it was adopted that the federal debt ceiling increase deal that was embodied in the Budget Control Act wouldn’t last until the election as the White House had hoped, the most recent estimates indicate that a vote before November will not be needed. As a result, the type of dispute that roiled financial markets in June and July and provided the GOP with what it thought was leverage over the White House won’t exist until a lame duck session of Congress when the political heat and stakes will be much different.

There will also be no way for the GOP to threaten a government shutdown because appropriations have been enacted for all of fiscal 2012. No short-term continuing resolution that has to be extended means that congressional Republicans can huff and puff about federal spending but won’t be able to use the threat of closing department and agency doors to force anyone to do anything.

And after the Republicans in Congress took it on the chin in the polls for taking the payroll tax extension hostage, it’s hard to see how being blamed for shutting down the federal government just as fiscal 2013 begins on October 1 will be a good political strategy for the GOP when it will need to appeal to more than just its base supporters in what at that time will be the impending general election.

Yes, a budget resolution is supposed to be adopted in 2012. But there will be no practical impact if Congress doesn’t do it. It may be embarrassing and could be a political problem. But no government operations will be affected and no one but the most policy-aware voters will even know about it.

That leaves the payroll tax cut that will expire at the end of February as the only legislation that potentially will give the GOP any leverage next year and could lead to a fiscal hostage-taking. Even that is somewhat less likely than it might seem, however, given the political beating Republicans are still taking on the issue.

In addition, if it chooses to use it, the payroll tax extension may give the White House as much or more leverage over the GOP as the GOP thinks it will have over the administration. It’s very likely that the president will make the extension a prominent part of his State of the Union Address on January 24th and claim the issue. With the House currently not scheduled to return to Washington until January 17 and the Senate not until the 23rd, it will be hard for GOP congressional leaders to get in front of the White House’s efforts.

If that happens, the GOP’s ability to take anything hostage may be gone until December 31, when the Bush/Obama tax cuts expire.

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About Stan Collender 126 Articles

Affiliation: Qorvis Communications

Stan Collender is a former New Yorker who, after getting a degree from the University of California, Berkeley, moved to Washington to get it out of his system. That was more than 30 years ago.

During most of his career, Collender has worked on the federal budget and congressional budget process, including stints on the staff of the House and Senate Budget Committees; founding the Federal Budget Report, a newsletter that was published for almost two decades; and for the past 11 years writing a weekly column for and now

He is currently a managing director for Qorvis Communications, where he spends most of his time working with and for financial services clients.

Visit: Capital Gains and Games

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