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In yet another eleventh-hour scramble on Capitol Hill, the House will vote tonight on whether to extend a payroll tax cut into 2012. Kojo examines the reasons why House Republicans are balking at a Senate-approved and White House-supported extension and explores what a stalemate could mean for middle class Americans come New Year’s Day.
- Felicia Sonmez Reporter, Washington Post
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, author Danielle Evans on her first book of short stories and the writing life. But first, in a surprise move, House Republican leaders on Sunday said they will reject the bipartisan Senate bill to extend the payroll tax break and unemployment insurance by two months.
MR. KOJO NNAMDIRepublicans are demanding a longer term resolution. House Speaker John Boehner saying the two-month extension was simply kicking the can down the road. And even the Republicans who negotiated the deal have now reversed course. If your head is spinning, there's good reason since it was Democrats who originally wanted a full-year extension. Failure to resolve this could trigger a year-end tax increase for pretty much every American taxpayer, something nobody wants heading into an election year.
MR. KOJO NNAMDIBut that doesn't mean a deal is eminent. Joining us to discuss this is Felicia Sonmez, who covers Congress for The Washington Post. She joins us from studios at The Washington Post. Felicia, thank you for joining us.
MS. FELICIA SONMEZThanks so much for having me, Kojo.
NNAMDIWe mentioned that this was a surprise, even to the Senate Republicans who negotiated and passed the measure. What happened?
SONMEZYes. Well, when senators left the Capitol on Saturday afternoon after passing both this payroll tax package and also a longer-term government funding bill, everyone was in holiday mode. They thought that they were heading home for the holiday vacation, and it was a foregone conclusion that this deal would pass both the Senate and the House. It turns out that that was not the case, and House Republicans had a conference call on Saturday afternoon in which the overwhelming majority of the rank-and-file members said that they were deeply, deeply dissatisfied about this deal.
SONMEZThe reasons that they gave were that they thought that this two-month extension was just not sufficient in order to give certainty to both the people who will be affected by this payroll tax cut holiday, an estimated 160 million people. And they also just felt that this was something that that would in a sense give Democrats the upper hand politically by allowing this debate to happen again at the end of February.
SONMEZSo for those reasons, they -- there was a revolt on the House Republican side. Now, we're seeing leaders come out. As you mentioned, John Boehner this morning said that the House is expected to vote down this measure when they come back to Washington at 6:30 tonight, and they're hoping to move to a conference committee, something that Senate Democrats have said they are completely not on board with.
NNAMDIWhat was in the measure that the Senate passed?
SONMEZWell, the Senate passed the measure -- passed on an 89-to-10 vote, which is overwhelming bipartisanship that you really don't see pretty often on Capitol Hill. And what was in it was a two-month extension of a couple of different provisions. The biggest one politically is the payroll tax cut holiday -- the payroll tax holiday, which was implemented last year, and then leaders on both sides, as well as the White House, want that to continue now.
SONMEZIf that holiday is not extended, that will amount to an increase of about $1,000 on average for millions of Americans. So in addition to that, there's also a renewal of unemployment benefits, as well as a measure called the doc fix, which prevents about a 27 percent increase in the reimbursement rates for doctors who see Medicare patients. All of those are pretty significant, and they do have bipartisan support.
SONMEZIn order to get this through the Senate and to get the support of Republicans, they're -- the two-month provision also includes a measure that would force the Obama administration to make a decision on constructing a pipeline...
NNAMDIKeystone oil pipeline, right?
SONMEZThat's -- yep, that's right. And that's something that the House Republicans were successful in getting into this bill, and it was assumed, I think -- well, now, we see -- wrongly by leaders that that pipeline provision would be enough to get the measure through the House, and it turns out that's not the case.
NNAMDIWell, a lot of people have the impression that Democrats moved pretty far to meet the Republican side on this, throwing in the aforementioned Keystone oil pipeline deal that Republicans really wanted, it would appear, as a sweetener. So will Democrats come back to the table now, you think?
SONMEZThey have said pretty -- in no uncertain terms that they're not planning on calling senators back, and even this afternoon, a few minutes ago, a member of the Senate Republican conference, Scott Brown from Massachusetts, issued a pretty withering statement disagreeing with Speaker Boehner's announcement this morning that the House is planning to vote down the Senate measure.
SONMEZHe called it irresponsible, and he says that a two-month deal is better than no deal. And from the Democratic perspective, they are saying we'll be happy to come back to the table for a one-year deal as long as the House passes this short-term one. It remains to be seen, though. You know, the Senate is technically adjourned -- well, they're on recess as of Saturday.
NNAMDIYeah. We'll get to that in a minute, but allow me...
NNAMDI...to have our listeners join the conversation. You can do that by calling us at 800-433-8850. Do you think the payroll tax break and unemployment benefits should be extended? 800-433-8850 or you can go to our website, kojoshow.org, join the conversation there, send a tweet, @kojoshow, or email to email@example.com. We're talking with Felicia Sonmez, who covers Congress for The Washington Post. Where does President Obama stand on this, Felicia?
SONMEZYou know, it's quite interesting because, in the beginning, when House Republicans first raised this idea of bringing in the pipeline provision, President Obama came out and said from the start he would reject any move to tie the payroll tax cut to that pipeline. Then what we saw over this weekend was that the White House came out very strongly in favor of the Senate package, which includes that pipeline.
SONMEZThey would like to see this two-month extension passed because, frankly, Democrats think that this an argument in which they have the upper hand when this payroll tax cut comes around again in February. But it's a little bit unclear right now whether, you know, they would be open to the Republicans coming back and both chambers negotiating.
NNAMDISo what happens next, of course, is that the House will vote later today on the measure, right?
SONMEZYes. Yeah, that's correct.
NNAMDIAnd it looks at this point as if it won't pass. Whether or not they'll sit down in committee conference with the Senate is still up in the air because the Democrats say they're not going to go back to the table. So, Felicia, what happens if they are not able to reach an agreement of any kind?
SONMEZIf they're not able to reach an agreement, it's -- there's both really big political ramifications, as well as just ramifications for everyone who, you know, pays taxes in the country and those on unemployment benefits. They -- I think it would be a pretty unlikely scenario that no extension gets passed simply because -- well, from the White House's perspective, they would view that as a loss.
SONMEZIt would be -- it would lead to an economic downturn that they say would be bad for Americans, as well as for the president's re-election prospects heading into 2012. And Republicans' polls are showing that they're the ones who are bearing most of the blame for this gridlock in Congress. The public views, especially on the House Republican side, the leadership is less willing to compromise with Democrats over their -- and so from the GOP perspective, any failure to get this through could mean a pretty disastrous thing for them heading into the election.
SONMEZSo they probably will, in actuality, pass something, but it's still a little bit unclear right now what -- whether that will be the two months or possibly a year.
NNAMDIHere now -- we go to the phones -- Steve in Germantown, Md. Steve, you're on the air. Go ahead, please.
STEVEYeah. Kojo, great show. The two-month extension, well, you know, I'd like your read on why -- you know, why would that happen? Why was it just two months? Which just sounds absolutely ridiculous 'cause...
NNAMDIWell, it's funny you shall bring that up because, Felicia, Republicans, as our caller pointed out, are insisting that employers need stability. And the tax break can't be just two months long. What might be confusing to some of us is the fact that Democrats originally supported this year-long extension. What happened?
STEVEWell -- but we changed this, go along and go, oh, we just don't understand this. I mean, from my read...
NNAMDIOh, that's just me.
STEVE...it's purely, purely political because, in my opinion, the Democrats want to come back and bang the Republicans again in two months, and they want to do it for two months more, come back and bang them and say they're against payroll taxes which, come on, payroll tax cuts, what is that going to do? It's going to sell us some more flat-screen TVs manufactured in South Korea. I mean, we don't need money to go to people with jobs, OK, that will just have incremental income to buy things from existing companies. We need new companies.
SONMEZWell, that argument, interestingly...
STEVEI mean, the whole payroll tax cut is a job creator. It's just -- it doesn't even make sense on its surface.
NNAMDIFelicia, go ahead, please.
SONMEZSure. Well, that's interesting because that's the argument that you've heard a lot on -- actually in both chambers say, but particularly among the House Republicans. A lot of them are not sold on the idea that an extension of this payroll tax holiday is actually a good thing, both for the economy and also for the Social Security trust fund, which is those payroll taxes go to. So I think that that is definitely an important point to make in this whole calculus.
SONMEZThe Republicans in the House now who are pushing for this one-year extension at least being led by leadership to push for that. A lot of those members don't really think that this is going to be a good thing for the economy, which was a division that a lot of Democrats felt that they had revealed by bringing this up as an issue. It's interesting because the Republican Party for decades now...
SONMEZ....has been defined by this orthodoxy of being against taxes being raised. So this issue is one where that's not the case.
NNAMDIWell, to even break it down farther for Steve for a second, it would appear that Republicans are arguing that this payroll tax cut won't do much for the economy, but the tax cuts that were extended to the wealthy do something good for the economy by creating jobs and that this payroll tax cut would not, in fact, create jobs.
SONMEZRight. Exactly. And that's an argument that's going to be coming up again at the end of next year when those Bush-era tax cuts are going to expire. The vast majority of Republicans on Capitol Hill do support an extension of those tax cuts. But this Social Security payroll tax cut in particular, a lot of them just -- it's -- there are political omens to it, but I think it's even -- it goes even deeper than that.
SONMEZThe opposition to this is really just a fundamental belief that this is not going to do much to stimulate the economy. Now, Democrats counter that and say that there's a whole host of economists out there who said that this would result -- a failure to extend this payroll tax cut would really affect, you know, the growth of the economy as a whole. So it's a legitimate point of policy differences between the two parties.
NNAMDIThank you for your call, Steve. Here is Zeke in Herndon, Va. Zeke, you're on the air. Go ahead, please.
ZEKEYeah. I think I have two points. Hopefully, I can make them rather quickly. My first thing is that I think that the Social Security payroll tax cut is being demagogued, I think, by both sides because they're (unintelligible) and to try to characterize them the same as the income tax, whereas the payroll tax goes to fund Social Security. So unless you want to cut Social Security benefits, you should raise -- you shouldn't keep the payroll tax cut.
ZEKEWhereas the income tax goes to fund general government and if you want to -- you know, if you don't want to raise taxes, you should cut government spending, which everybody wants to do. But they don't want to cut Social Security benefits. So you should leave the payroll tax cut in there. My second point is I think that President Obama kind of campaigned himself into a corner.
ZEKEAnd I think that a lot of people would be OK, a lot of wealthy people or people in general would be OK with having their taxes raised if they were raised for everybody. Somebody who's already paying 35 percent of their income to the federal government is like, OK, I might suck it up and pay 37 percent if I see that someone who's only just paying 10 percent is willing to pay 12 percent. But the way President Obama campaigned is kind of pitting people against each other where they get really, really defensive.
ZEKEAnd it's kind of like an us-versus-them mentality instead of, hey, I know I'm already paying 35 percent of my income, I'll pay a little bit more if you were paying, I don't know, 8 or 9 percent, are willing to pay 11 or 12 percent. So that's what I had to say about that.
NNAMDII don't know how that falls into this discussion, Felicia Sonmez, but you might.
SONMEZSure. Well, I think it's -- you know, it goes all back to this issue of how does the White House -- what does the White House want to be talking about as they head into this election? And it seems that they are very happy to have this payroll tax cut fight because it's one issue where they're on the side of extending a tax cut that is not incredibly popular among Republicans.
SONMEZIf they weren't having this fight -- and, in other words, if the one-year extension were continued and this was taken off the table -- I think a lot of the argument that you'd see playing out would be back to, you know, the issue of just broader taxes and the Bush tax cuts, the millionaires' surtax that Democrats have put on the table.
SONMEZAnd that's an argument where the GOP has a little bit more leverage. So it's quite a different, I think, political landscape than we saw in the summer when there were, of course, the debt ceiling talks, and the country was on the brink of default. But I think one thing that's been consistent throughout this whole thing is the argument about certainty, that neither side wanted to -- both sides were making the case that their actions were going to bring the greatest certainty to government and to taxpayers.
SONMEZThe interesting thing now, though, is that this two-month extension is -- you're seeing Republicans make the case for certainty. And in previous debates throughout the spring and the summer, that wasn't exactly the case, especially when the government came to the brink of shutdown a couple of times. You know, they were passing two-month funding resolutions that were backed by the GOP, and that was because that was seen as political advantage at that time, this time around, maybe not so much of an advantage.
NNAMDIBut I'm wondering just how this will play outside the Beltway. For people who don't understand the minutia of what's happening here, it seems that the Democrats want to be able to say -- Republicans say they are against any kind of taxes being raised at all. They are all for tax cuts for the wealthy. But when we offer tax cuts for the middle class, they're against it. That's how it's likely to play outside the Beltway, isn't it?
SONMEZMm hmm. Sure, yeah. And I think another aspect that's important outside the Beltway is that -- how long is Congress willing to stay in town to get their job done?
NNAMDIAh, we got to get to that. We should mention that the Senate passed this bill in a rare Saturday session and then left for their holiday break. But they didn't officially go into recess. Why?
SONMEZRight. It's a little bit complicated. President Obama has suggested that he'd like to make a couple of recess appointments when Congress is out of town, one of those being the head of this Consumer Financial Protection Bureau, who Republicans in both chambers overwhelmingly oppose. They don't necessarily oppose him. They just oppose -- they would like to see some changes made to this bureau.
SONMEZSo because of that whole fight, the Senate is technically going to be holding very brief sessions the next couple of days, every few days for the next couple of weeks to block Obama. That means, though, that they could technically come back into session or pass something. They haven't adjourned for good for the rest of the year.
NNAMDIAnd, finally, here's this from Hal in Fairfax, Va. Hal, you are on the air. Go ahead, please.
HALYes. Thank you for taking my call, Kojo. Three points, since the last one is fresh in my mind, the -- this is just another piece of evidence that shows the Republican Party, Congress in general, but really the Republican Party has really just become the party of chaos. Whatever it takes to block the president is what they're going to do. My previous two points have to do with -- my next two points have to do with the two callers that were previous to me. One of them was stating that…
NNAMDIYou mean, you're not going to buy a new flat screen TV with your payroll tax cut?
HALYou know what? With -- if I do, that creates economic activity, and we are in a consumer-based economy. So buying a flat screen television creates economic activity, which assists people in helping to keep their jobs. Number two is what -- concerning the tax rates, most of the benefits have gone. This is demonstrably provable. Most of the benefits have gone to the top 5 or 10 percent of Americans.
HALSo if they have to pay for more taxes, they should pay more taxes 'cause most of the benefits of the economic drivers that have happened over the last 20 years have gone to them. Lastly, not everyone is paying 35 percent. If you make your money on dividends, you are making -- you're only paying current income, which is 15 percent.
NNAMDIHal, we're running out of time very quickly. But, Felicia, Hal's comments indicate the beat goes on.
SONMEZYeah. And I think that this is definitely -- it's a very fitting coda, in a way, I think, to this first session of Congress, where the House Republicans came in, promising big changes and wanting to make lasting changes. Whether or not they're successful in this sort of last-minute revolt in an effort to change this payroll tax cut package, I think, will tell us a lot more about how the next session is going to be playing out when they reconvene in January.
NNAMDIAnd thank you for your call, Hal. Felicia Sonmez covers Congress for The Washington Post. Felicia, thank you so much for joining us.
SONMEZThanks so much.
NNAMDIWe're going to take a short break. When we come back, author Danielle Evans on her first book of short stories. I'm Kojo Nnamdi.
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