Behind the GOP's Payroll Tax Surrender

Republicans now must lick their gaping, self-inflicted political wounds and plan for the coming debate over how to pay for the remaining 10-months of a payroll-tax extension



There was no formal cease-fire.

Speaker John Boehner didn't even call Senate Majority Leader Harry Reid to offer up his payroll-tax sword of surrender.

The great Christmas conflict over tax cuts ended at the staff level. Boehner's chief of staff, Barry Jackson, cut the deal with Reid's chief of staff, David Krone. If the weeklong tussle over a two-month or one-year extension of payroll taxes was over principle, the principal antagonist, Boehner, in the end, had neither the will nor the stomach to directly sue for peace.

Preordained since at least Tuesday, the only variable on the eventual House GOP retreat was timing. When. Not if. Republicans within leadership circles and those who used to be but now prowl K Street could smell defeat almost from the start. It reeked like reindeer road kill. House Republicans tried for two days to shift public opinion but were met by the Obama megaphone, which grew louder and more visually emphatic by the day.

The mechanics of the endgame commenced, in fact, right after President Obama stood with dozens of middle-class Americans who stood to lose -- on average -- $83 a month if the 2 percent payroll-tax cut expired on Jan. 1. Mere hours after a press event where they looked implacable and entrenched, Boehner and House Majority Leader Eric Cantor met with the eight Republicans appointed to a nonexistent conference committee on the payroll-tax issue. They swiftly told Boehner to seek a deal with Reid.

House Ways and Means Committee Chairman Dave Camp, R-Mich., then called Sen. Max Baucus, D-Mont., chairman of the tax-writing Finance Committee, to negotiate new language to smooth out implementation of the two-month payroll-tax-cut extension. The language was not controversial. Senate Democratic aides said if the issue had been raised by Senate Republicans, it would have been addressed when the bill was first drafted.

At roughly 2 p.m., Boehner set up a conference call with his leadership team and told them he would accept Reid's demand for a two-month deal, with the new payroll-tax language. They agreed without complaint.

Jackson then called Krone, who readily accepted the contours of the GOP retreat. Krone checked with the Baucus staff and ran the deal past Reid. The majority leader accepted without hesitation, as his aides celebrated what they described as a "total cave." Krone called Jackson back, and it was over.

Interestingly, it was the first time Jackson and Krone -- who negotiated their way around near-miss government shutdowns and debt defaults -- had spoken since Saturday. Previously, Jackson and Krone had inched their way through tough negotiations. This time, the retreat went from zero to 60 mph.

Boehner went through the motions of a conference call to "consult" House GOP lawmakers. But no one could speak up. It was a directive, not a conversation. That's because at least 75 percent of the GOP conference had already surrendered back home, or were in the process of doing so. Rep. Rick Crawford, R-Ark., switched from full-fight to full-flee in roughly 48 hours. Another freshman, Rep. Sean Duffy, R-Wis., who came to Congress after starting on MTV's Real World Boston in 1997, also pleaded with Boehner to end the misery. When Republicans lose rural Arkansas the MTV generation on the same day, you know it's over.

What's next?

Boehner might say ruefully, an end to two-way conference calls with House Republicans (on Saturday, Boehner gingerly embraced the Senate bill expecting some favorable response -- he got nothing but hot-headed denunciations).

In truth, Republicans now must lick their gaping, self-inflicted political wounds and plan for the coming debate over how to pay for the remaining 10-months of a payroll-tax extension, jobless benefits, and the so-called Medicare doc fix. The two-month package cost $31 billion, a 10-year price tag offset by new fines assessed to government-backed mortgage giants Fannie Mae and Freddie Mac.

It will take other offsets to cover 10 months of the benefits Congress is about to improve. Amid the ruins of this tactical debacle on Thursday, stout-hearted Republicans hoped the debate over paying for the payroll-tax cut, jobless benefits, and doc fix with budget cuts might give them the high ground. Republicans say that Democrats have already given up on the millionaires' surtax and with the two-month deal accepted the idea of assessing fees or finding other offsets to pay for these benefits.

If past is prologue, Democrats might find this a tricky debate. But Democrats may revive the millionaires' surtax -- and nothing from this debate would discourage them -- and force Republicans back onto the terrain they found so politically uncomfortable.

In either case, Republicans better gird themselves for another battle over the payroll-tax cut and the prospect of inflicting higher taxes on 160 million taxpayers. That's exactly the debate they didn't want to repeat in February when they balked at the Senate deal in the first place. Horrible politics, they screamed at Boehner.

House Republicans have horrible politics squared. Now and two months from now -- unless they figure out a way to balance the desire of taxpayers for a continuation of their payroll-tax cut against their desire to reduce the size and scope of government.

That failed once and visibly so. Unless House Republicans reverse that trend, February could look like Groundhog Day. Except it won't be nearly as funny as Bill Murray's version.