House GOP admits defeat on Payroll Tax cut extension

The calculus in this case is all political; don't raise taxes in an election year, and fight the fights that you have a chance of winning.

The House GOP has dropped its demand that the payroll tax cut not be extended unless there were spending cuts to offset the lost revenue. It reflects the reality that the Democrats will not agree to any spending cuts, and that it would be political suicide to have the party saddled with a tax increase in an election year.

The Hill:

Speaker John Boehner (R-Ohio), House Majority Leader Eric Cantor (R-Va.) and House Majority Whip Kevin McCarthy (R-Calif.) also said Monday that the payroll tax measure could get a vote this week, depending on how the Republican rank-and-file reacts to the idea. 

"Democrats' refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don't go up on middle class workers," the three leaders said in a joint statement.

The GOP move would decouple the payroll tax cut from two other policies set to expire at the end of February. Republicans are demanding that an extension of federal unemployment benefits and the "doc fix," which prevents a scheduled cut in physician payments under Medicare, be offset with other spending cuts. 

A conference committee of 20 lawmakers created to craft a year-long extension of all three pieces have been struggling to make progress, with roughly two weeks left before the three items expire.

Democratic conferees last week offered a compromise on unemployment insurance that was roundly, and quickly, dismissed by Republicans.

With this new tactic, Republican leaders could lose votes within their own party, especially given that many GOP lawmakers were skeptical of the payroll tax cut to begin with. But they are likely to gain support from Democratic leaders, who have signaled they would agree to extend the tax cut without offsets if necessary.

There will be a mini-revolt among the tea party caucus but it is almost assured that the tax cut will survive for a year. One might wish that political realities always walked hand in hand with good governance. In this case, such is not to be. Trapped by their own blundering on the issue, the Republicans had little choice but to run away and fight another day.

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