The current battle over whether to extend, and deepen, cuts to the payroll tax is a sign of the tepid political times in which we live.
Democrats appear to have painted Republicans into a corner by insisting on tying a surtax on the wealthy to the reduction (which would take the tax down to 3.1 percent from what had been 6.2 percent a year ago). Some Republicans oppose the new cut because the one passed last year hasn't stimulated the economy. Others see the political liability in opposing the extension, which would effectively raise taxes on middle-income Americans at a time when many in the GOP have steadfastly opposed all tax increases. Both Mitt Romney and Newt Gingrich, the current Republican frontrunners for the White House, endorse extending the cut.
The argument now seems to center on how to raise money elsewhere to cover the $180 billion cost of the cut. But both sides resemble dogs trying to chase their own tails. Americans don't need any more complicated gyrations that take from one set of people while giving to another, all the while ignoring the nation's looming fiscal crisis. They need comprehensive tax reform — a difficult but necessary step that would require political courage.
There are credible blueprints for such reform. As we have noted before, President Obama's own National Commission on Fiscal Responsibility and Reform came up with a credible solution earlier this year. It would have broadened the tax base, removed most deductions and exemptions and raised more money while actually reducing marginal tax rates. It called for a combination of real cuts to programs, including Social Security and defense, as well as some reasonable tax increases.
Predictably, it led to howls of protest from politicians trying to reflect the views of their favored constituents. Any serious plan would lead to a similar response. Real reforms are not painless, but the current tax code is far too complicated, and entitlement programs no longer are sustainable. Trillion-dollar annual deficits and a $15 trillion national debt won't go away with a few trims on the margins, no matter how politically popular.
After rejecting two other House proposals to attack the problem, Washington has done little other than argue and hurl insults.
Payroll tax cuts provide meaningful relief for many average American wage earners, but they exacerbate the problem of funding Social Security, which already faces a future of deficits. The idea of raising taxes here or freezing wages and benefits there is little more than haphazard budgeting, unguided by any overall philosophy or sense of fairness.
Americans have watched from afar as Europe struggles with massive debts and ineffective politicians. Nothing in the current payroll tax debate is going to help the United States veer from that same path.