The Washington Deadlock

The US House of Representatives is mostly empty this evening. The Senate is entirely empty because Senators left for the Christmas holiday two days ago. President Obama is rattling around alone in the White House because his wife and two daughters are on holiday in Hawaii without him while he waits to sign a bill that now would have to be passed by the Ghost of Christmas Past because there’s no one else left in Washington to do it.

All because of a payroll tax bill that everyone wants and no one seems to know how to get passed.

On Tuesday the House rejected a Senate compromise that would have extended a federal payroll tax holiday for two months, continued unemployment benefits for the long-term jobless and averted a cut in the reimbursement rate for doctors who treat Medicare patients.

This means millions of American workers will see their paychecks shrink by something like $60-100 in January. That doesn’t seem to be much, but those two months will cost $36 billion.

And Congress cannot figure out how to pay for the payroll tax holiday in a way everyone can agree on. Should they cut entitlements or raise taxes? That is the question even Hamlet could not answer if he were in Washington these days.

What makes matters worse is that Republican Senators voted for the Senate bill and Republican House members stonewalled their leadership, or perhaps shielded their leader, John Boehner, from the tea partiers out in the real world who want no increased taxes and no additional federal debt. That leaves only entitlements cuts as a vehicle for paying, something which the Democrats are firmly opposed to.

Extending the tax cut for a full year, as well as unemployment benefits and Medicare rates, would cost $200 billion.

The two sides disagree about how to replenish Social Security, which is funded by payroll taxes. They’ve agreed to cover the $36 billion of the cost by raising the fees Fannie Mae and Freddie Mac charge lenders for guaranteeing loans. That’s what the Senate used for its $33 billion two-month deal. But the Democrats and GOP have not been able to close the gap on a full-year deal.

The GOP House bill passed last week proposed entitlement cuts, including an increase in Medicare premiums for upper-income seniors and freezing federal salaries and shrinking the federal workforce.

Democrats want to raise taxes on the wealthy to offset the payroll tax cut, which is enjoyed by middle-income workers.

Under Obama’s American Jobs Act, the tax cut would be paid for by limiting tax deductions for families making more than $250,000 a year. Senate Democrats instead proposed a surtax on those making more than $1 million a year.

House Republicans insist the two sides are not far apart and that further talks could bridge the differences.

Obama said Senate leaders “made good progress” last week but decided that more time was needed to resolve the dispute and called for the two-month deal to be passed as “an insurance policy” against a tax increase.

That deal included a provision that would have required the Obama administration to make a speedy decision on the controversial Keystone XL oil pipeline, a concession to House Republicans who don’t believe the tax cut is a good way to stimulate the economy.

Many Democrats charged Tuesday that continued GOP reluctance to extend the payroll tax cut was the true cause for the Republican opposition. The Republicans say this is not true.

Stalemate.

One would think that with a $1 Trillion debt already hanging over their collective heads, Congress and the American people would shrug their shoulders and say, how’s another $200 Billion going to hurt?

But, it would hurt. What’s more, it would be the first slide down the slippery slope that leads to no budget control and no concern for the huge federal debt and little worry about who spends what and why.

That is the real problem we are witnessing in the paralysis we may think silly and unprofessional. It is neither silly nor unprofessional.

It is easy to say that a two-month extension won’t hurt. That it will all be easily resolved after the holidays, that no one wants American workers to lose money that could provide some of the weak stimulus needed in the American economy.

But, that is not the point. The point is that Democrats, often with the help of unmindful Republicans, have raised taxes, but not enough to pay for what they have spent, for a long time, and it is not time to pay. The paying will hurt. It is hurting now as John Boehner and his band try to make the point that America cannot go on as it has - that it must finally take responsibility for its finances - that spending must be controlled - that budgets must be balanced.

Why? Because if Boehner, and the rest who support him, fail, America will fail. Her credit rating will sink. Her money will become essentially worthless. If not this time, the next time. But the day will come and it is approaching with increasing speed.

Perhaps even more important, her place in the word will be jeopardized because she will no longer have the financial means to be the world’s leader.  It is easy to say, bring the troops home, stay out of foreign squabbles and wars, let the rest of the world take care of itself, and build an invisible wall around America that will keep her prosperous and safe no matter what happens elsewhere on our planet.

But, we know that is not how the world works today. Either America remains the leader, or someone else - China or Russia or a combination of them and others - will fill the vacuum.

When that day comes, it will be too late to pay America’s bills.