One of the economic stimulus provisions, the payroll tax cut, is unlikely to be extended when Congress tackles the fiscal cliff issues of tax cut extensions and budget cuts at the end of the year. The administration and congressional Democrats wanted it to be temporary, short-term economic stimulus putting a bit more money in people's pockets. They saw a danger in allowing the cuts to become like the Bush tax cuts, essentially permanent. Now the focus is going to be
on the Bush tax cuts.
“This has to be a temporary tax cut,” said Timothy F. Geithner, the Treasury secretary, testifying before the Senate Budget Committee this year and voicing the view of many in the White House and on Capitol Hill. “I don’t see any reason to consider supporting its extension.”
The White House has not pushed for an extension. “We’ll evaluate the question of whether we need to extend it at the end of the year when we’re looking at a whole range of issues,” Jay Carney, the White House press secretary, told reporters last month. [...]
Support is lacking for two main reasons. First, both Democrats and Republicans would rather focus on the broader political and economic issue of the fate of the Bush-era income tax cuts. These cuts, too, were initially meant to be temporary, but are now deeply entrenched in the tax code and central to the budget battle.
Second, though the economy has not become significantly stronger over the past year and the tax increases in addition to spending cuts coming next year could push the country into a recession, independent economists say that the economy could shoulder the payroll tax increase without undue harm.
During the last extension fight, Republicans—looking for any excuse to give the president a loss—fought the extension on the same grounds many progressives opposed it, because it was a hit on Social Security revenues. Or that's how they framed it. The revenues that didn't go to the Social Security Trust Fund as a result of the payroll tax holiday were actually offset by payments from the general fund. But the danger Democrats saw in the arrangement was the linking of Social Security to the budget and to false arguments that Social Security contributes to the deficit.
There are other means to providing the kind of wage boost that the payroll tax holiday provided, stimulus efforts like the "Making Work Pay" tax cut for lower income workers that was passed with stimulus, but ended after two years. That's just one possibility to keep giving a wage boost that Congress could explore again in the lame duck and in the new Congress. But those possibilities will depend entirely on the outcome of the election. If there's a Romney/Ryan victory, lower and middle income earners can say goodbye to any number of tax breaks. And if there is still a solid Republican majority in the House and the Senate filibuster rules aren't reformed, even with an Obama victory, we can likely look forward to another two years of gridlock and obstruction.