Taxing America's Patience, Part 2

If Bloomberg News is to be believed, the White House has just bought the GOP "corporate tax cuts will save the economy!" nonsense.

President Barack Obama’s advisers have discussed seeking a temporary cut in the payroll taxes businesses pay on wages as they debate ways to spur hiring amid signs that the recovery is slowing, according to people familiar with the matter.

The idea, which is in preliminary stages of discussion, is among several being talked about at the White House as the economy holds center stage for the administration and Congress, the people said on condition of anonymity to discuss internal deliberations. The unemployment rate in May rose to 9.1 percent, the highest level this year.

The talks reflect the political constraints the White House is operating under with the Republican majority in the U.S. House pushing to cut federal spending. A hiring stimulus based on a tax break for employers may appeal to Republican lawmakers, many of whom have called for measures to help businesses. 

Republicans will either reject the measure saying it needs to be made permanent, or support the measure but demand something else for more hostage-taking fun (probably both, the usual routine.)  Let's remember that Obama was saying just a few months ago that American businesses were sitting on nearly $2 trillion in balance sheet assets (a claim Politifact rated as Mostly True, it's just not all liquid investable cash.)  Businesses could be hiring but they're not.  Tax cuts freeing up more assets to invest isn't the issue when businesses are sitting on records amount of balance sheet assets before the tax cuts.

Now apparently the President's economic team has bought the Republican argument that businesses are afraid to expand because of "high taxes and regulations" so the White House is now considering a payroll tax break on employers (not employees).

It's very possible that this is the only thing the Republicans will allow as far as stimulative action for the economy.  It's also proof that Republicans don't care about the deficit, which is why I think Republicans will only go along if the payroll tax cut is matched by -- you guessed it -- an equal or larger spending cut.

If that's the case, then what this actually turns out to mean is that the Republicans have all but completely won the messaging war on the economy, and that only Republican tax and spending cuts will be in the cards, something of course that will make the economy steadily worse...and Republicans will simply blame Obama for not cutting enough.

It's a terrible hand to be holding for the White House to actually play.   If this happens, the debt ceiling argument is totally lost to the Dems...and so is the economy.