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Published: Sunday, 12/11/2011

COMMENTARY

A little help, Congress, for the rest of us

BY DAVID KUSHMA
BLADE EDITOR

If you're lucky enough to have a job covered by Social Security, your payroll taxes are scheduled to go up Jan. 1. If you're a typical middle-class worker, that would cost your family nearly $1,000 next year.

If you're unlucky enough to have been out of work for more than six months, you could lose your extended federal unemployment benefits at the end of December. As many as 77,000 Ohioans and 61,000 Michiganians face that prospect.

Happy holidays!

Relax, a little. President Obama and Congress are likely to find some way to extend, and maybe even expand, the cut in Social Security payroll taxes for another (election) year. And it's hard to imagine that even the most hard-core Scrooges on Capitol Hill would cut off extended benefits at a time when the nation's jobless rate remains so high and the average duration of unemployment is 10 months -- a heartbreaking record.

But preserving these useful, if limited, measures shouldn't come down to the wire. And as always, the big question will be what lawmakers will feel compelled to extort in return. Recent precedent offers no comfort.

As part of last year's deal to maintain the George W. Bush tax cuts -- unnecessarily -- for the wealthiest Americans, Congress and the President temporarily reduced, from 6.2 percent to 4.2 percent, the rate of payroll tax that employees and employers pay to support Social Security. Senate Democrats want to cut the employee tax rate to 3.1 percent next year. Mr. Obama has sought a similar cut for employers on the first $5 million of their payroll.

Democrats would pay for another year of the payroll tax cut by imposing a 10-year surcharge on Americans who make more than $1 million a year. Republicans say they're willing to extend the tax cut, but want to do it by forcing quick construction of the Keystone XL oil pipeline, or limiting jobless benefits, or weakening clean-air rules, or freezing federal workers' pay, or doing whatever else strikes their fancy on a given day.

"It's amazing to me that the defenders of the 1 percent cannot seem to see the other 99 percent," U.S. Rep. Marcy Kaptur (D., Toledo) told me last week. "They are fighting to the death to raise taxes on the middle class and deny benefits to those who are out of work. They're out of touch with reality, and they're doing a great disservice to the country."

The employee tax cut ought to be extended. The economy remains weak; despite signs of recovery, more Americans are dropping out of the work force than entering it. The housing market, locally and nationally, is still lousy.

Economists say that the payroll tax cut, by putting money in the hands of consumers who spend it quickly, has helped stimulate the economy. There's no reason to think it would not continue to do so in 2012.

There's less of a case for extending the tax cut for employers. The evidence is scant that it has caused businesses to take on workers they wouldn't have hired anyway because of their own expansion plans. So it's just as well that the employer cut appears to be falling out of the deal.

The GOP argument that raising taxes on the richest Americans would punish "job creators" is bogus. People who make more than $1 million a year are far more likely to be corporate or Wall Street plutocrats than the small-business owners Republicans say they want to defend.

If some folks in the latter category are pushed into the million-plus bracket by reporting business income on their personal tax returns, senators of both parties have offered ways to protect them without placing the surtax off limits. In any event, it's unclear why tax cuts for the wealthiest folks automatically promote economic growth, as Republicans claim, while a tax cut for the rest of us wouldn't.

"If that were true," Miss Kaptur scoffs, "we should have the most robust job creation in the history of mankind."

If the payroll tax cut is extended, it should remain temporary. The money the tax cut is costing the Social Security trust fund is made up for now out of general-fund revenue, but that can't last forever.

When the economic recovery is strong enough, Washington will have to pursue serious, long-term deficit and debt reduction, which will require more revenue as well as deep spending cuts. That means reforming the tax code and entitlement programs. Removing the short-term expedient of the payroll tax cut after next year would leave politicians one less can to kick down the road.

The argument for preserving extended unemployment benefits is less ambiguous. Jobless workers don't hoard that money; they spend it on life's necessities -- food, utility bills, transportation, avoiding home foreclosure. That stimulates the economy too.

In Ohio, such benefits amount to $296 a week, on average. In Michigan, it's $291. You and your family don't live the high life on that.

The asinine assertion by some lawmakers and think tanks that extended benefits encourage lazy people to hold out for the perfect job, or to avoid looking for a job at all, insults millions of Americans who fell victim to the recession through no fault of their own. They don't deserve to be punished further.

Too many workers continue to chase too few job openings. Miss Kaptur says an executive of CSX Corp. told her the company is filling 4,000 jobs -- for which it has gotten 500,000 applications.

Congress and the President should keep it simple. They ought to renew the payroll tax cut for one more year -- possibly with a limited expansion for workers -- and maintain extended unemployment benefits, without embedding them in an impossibly convoluted deal.

Tear up the ransom note, Republicans. If the not-so-supercommittee couldn't deliver a grand bargain on spending and revenue after months of talks, it isn't going to happen in three weeks.

Don't oversell, or overthink, these measures. As Miss Kaptur urges: "Split the difference." Just pass them.

David Kushma is editor of The Blade.

Contact him at: dkushma@theblade.com



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