House Republican Opposition Puts Payroll Tax Cut Deal in Doubt

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Boehner's stance Sunday represents a reversal from his Saturday stance, when at that time he had urged his caucus to support the legislation. But as has happened numerous times since the Tea Party-dominated Republican Party retook control of the House in 2011 following the November 2010 election, Boehner caved-in to the conservative faction -- a faction that has been notorious for its opposition to compromise, finding common ground, and resolving an issue facing the nation.

Failure to Extend Payroll Tax Reduction Will Reduce U.S. GDP Growth

Most economists agree that a failure to pass the payroll tax reduction would lower U.S. GDP growth, as the reduction increases take-home income of working class and middle class employees -- two groups likely to put the extra money to use quickly if not immediately, thereby stimulating economic activity. In all, about 160 million Americans would benefit from the payroll tax reduction extension, and most Americans would see a $750 to $1,500 annual tax increase without the reduction extension.

What's more, failure to pass the bill would also jeopardize the extension of unemployment compensation benefits and an effort to prevent a cut in payments to doctors who accept Medicare.

In a Sunday conference call with Boehner, House Republicans said he and his caucus would not support the tax reduction extension because it would increase the deficit without creating jobs, the latter of which most economists say is not the case: most economists argue that the payroll tax reduction extension will stimulate the economy.

The House Republican stance also contradicts the GOP's long-standing stance on tax cuts. Republicans argue that tax cuts stimulate economic activity -- it's a major reason they favor cutting taxes, routinely. For some reason, however, the Republican Party is arguing that the payroll tax reduction in December 2011 is different, but the party has not been able to mount a credible empirical argument to support its contention, and most economists say the party is simply flat-out wrong.

U.S. Sen. Charles E. Schumer, D-N.Y., said Mr. Boehner's comments raise questions about his ability to lead.

"This is a test of whether the House Republicans are fit to govern, and it is a make-or-break moment for John Boehner's speakership," Schumer said in a statement, The New York Times reported Sunday. "You cannot let a small group at the extreme resort to brinkmanship every time there is a major national issue and try to dictate every move this nation makes."

Political/Public Policy Analysis: In theory, House Republicans could sub a one-year payroll tax reduction extension for the two-month extension the caucus opposes, providing proof for the House GOP's stance that it "wants a longer extension."  But, given the caucus's track record to-date, that is a naïve analysis of the Tea Party-led caucus' stances in 2011, a year replete with Tea Party-led obstruction, intransigence, and brinkmanship.