AP's Babington Rolls Out Obama and Dems' Talking Points on Extending Payroll Tax Cut

The opening sentence of Charles Babington's "objective report" about the possible extension of what was billed late last year as a "temporary payroll tax cut" reads like a Democratic National Committee press release: "News flash: Congressional Republicans want to raise your taxes."

It doesn't get any better until the final paragraph. Babington's babble is otherwise a long-winded, chidish taunt about the supposed hypocrisy of anyone who would like to see a program which, for all its very considerable faults, at least ran a cash surplus for several decades get into the neighborhood of where taxes collected almost equal disbursements.

Here are selected paragraphs from the AP reporter's rudimentary rubble (bolds and numbered tags are mine):

GOP lawmakers are so virulently anti-tax [1], surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?

Apparently not.

Many of the same Republicans who fought hammer-and-tong [2] to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different "temporary" tax cut should end as planned. By their own definition, that amounts to a tax increase. [3]

The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a "payroll tax" on practically every dime they earn.

There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.

"It's always a net positive to let taxpayers keep more of what they earn," says Rep. Jeb Hensarling, "but not all tax relief is created equal for the purposes of helping to get the economy moving again." The Texas lawmaker is on the House GOP leadership team.

As part of a bipartisan spending deal last December, Congress approved Obama's request to reduce the workers' share to 4.2 percent for one year; employers' rate did not change. Obama wants Congress to extend the reduction for an additional year. If not, the rate will return to 6.2 percent on Jan. 1.

Obama cited the payroll tax in his weekend radio and Internet address Saturday, when he urged Congress to work together on measures that help the economy and create jobs. [4] "There are things we can do right now that will mean more customers for businesses and more jobs across the country. We can cut payroll taxes again, so families have an extra $1,000 to spend," he said. [5]

... Republican lawmakers haven't always worried about tax cuts increasing the deficit. They led the fight to extend the life of a much bigger tax break: the major 2001 income tax reduction enacted under Bush. [6] It was scheduled to expire at the start of this year. Obama campaigned on a pledge to end the tax break only for the richest Americans, but solid GOP opposition forced him to back down. ... For decades the payroll tax generated more revenue than the Social Security paid out in benefits. The excess was used to fund other government operations. Last year, however, Social Security benefits began outstripping revenue from its designated sources, forcing the program to start tapping its "trust fund" of government obligations. [7]

Notes:

• [1] -- So to which of the non-medical meanings of "virulent" is Babington referring? Is it "violently or spitefully hostile," or "intensely bitter, spiteful, or malicious"? Y'know, people who oppose tax increases do so because they believe that people are better able to decide where their money can or should be spent, and because an economy tends to suffer when taxes rise to a demotivating level.
• [2] -- Another instance of violent-appearing imagery, though the actual definition of "hammer-and-tongs" (that's plural, Chuck) is "with great vigor, determination, or vehemence."
• [3] -- By Social Security's 75-year "definition" and the clearly communicated intentions of FDR and Democrats at the time, payroll taxes collected are supposed to sustain the program's ability to pay benefits. That historical linkage was broken to pieces in last year's deal to cut the employee's portion of the payroll tax to 4.2% from 6.2%. Thanks largely to this year's payroll tax cut, taxes collected this year will fall short of benefits paid by about $166 billion billion (the estimated $120 billion amount of the tax cut plus an already projected $46 billion cash deficit). From all appearances, the rest of the government is making up the tax cut-related shortfall just noted by transferring about $9-10 billion a month we don't really have directly into Social Security. The latest available breakdown of system receipts as of February (go here, and select "calendar" and "February" at the link) shows $52.3 billion in collections. February's Monthly Treasury Statement (in the second-page line item called "Employment and General Retirement, Off-budget"; the "on-budget" number is the separate Medicare tax) is only $43.1 billion.
• [4] -- The evidence that this year's cut did much of anything to "help the economy and create jobs" is sparse indeed, given that the latest data on economic growth show an average rate of less than 1% annualized during the first six months of 2011.
• [5] -- Several other AP writers in the past 2-3 months have pointed out that the referenced $1,000 has been gobbled up by increases in gas prices, the responsibility for which largely resides in the administration's refusal to explore and drill for oil (which, if done aggressively enough, would certainly bring down the worldwide barrel price and prices at the gas pump). Babington "somehow" forgot to mention that.
• [6] -- Here we go again. First of all, the tax cuts took place in 2001 and 2003; the latter cut, which reduced across-the-board income tax rates as well as the rates on capital gains and dividend distributions, were far more important in affecting business behavior and improving the economy. As seen here, after the 2003 tax changes were passed, Treasury receipts increased by 44% from $1.78 trillion in fiscal 2003 to $2.57 trillion in fiscal 2007. Despite overindulgent spending by Congress during that time, the deficit in fiscal 2007 came in at $162 billion, which in Obamaland isn't that much different from the deficit in a typical month.
• [7] -- Finally, a dose of the truth, even with the term "trust fund" in quotes. Too bad Babington saved it for the final paragraph of his report, which will more than likely fall to the cutting room floor in many AP subscribers' news accounts, radio updates, and TV broadcasts.

Separately, it seems odd that the Social Security Administration only has reports on activity in the "trust funds" through February. They're not usually that far behind. What's going on?

There are clearly other huge problems with Social Security in the long-term, but the immediate issue is that it's pulling money from a federal treasury which is already drained. The challenge is to increase the number of workers paying into the system. Besides adopting policies designed to grow the economy, repealing the Social Security Earnings Penalty would motivate more seniors to stay in the workforce even after they start receiving benefits, leading the government to collect more in Social Security and other taxes. Unfortunately, that idea seems not to even be on the table.

Finally, if you want to see hypocrisy, one need go no further than the headline of Babington's outburst: "GOP may OK tax increase that Obama hopes to block." How many times did an AP headline call "repealing the Bush tax cuts" a "tax increase" when Barack Obama, Hillary Clinton, or any other Democrat was advocating their repeal? The educated guess here is darned near never. But when this AP headline writer had a chance to pin a tax increase on conservatives or Republicans, he or she didn't hesitate to let it rip.

Cross-posted at BizzyBlog.com.