Insignificant Two-Month Payroll Tax Costs 10 Years of Mortgage Rate Increases

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Suppose you were an idiot. And suppose you were a member of Congress. But then I repeat myself.

~ Mark Twain

Update 12/26: Here is the part of the payroll tax cut story that no one is reporting outside of Godfather Politics and the WSJ. The fact is that the payroll tax cut, which gives Obama and Congress their not-to-be-delayed vacation, will pay for the small tax cut with a ten year increase in mortgage fees.

They agreed to a plan that’s so stupid, I wonder if they are all on drugs. Do we really need any of them? They make millions from their jobs of “service”, have voted special medical benefits and raises for themselves, deal in insider trading, but they can’t come up with an idea better than this?

The Wall Street Journal reports,

Rank-and-file frustration has existed all year, and never really left even when Boehner tried to accommodate the concerns of his restive freshmen. The payroll-tax cut battle put a fine point on the caucus’s broader concerns about government spending and budget gimmicks, in part because the $33 billion, two-month package is set to be paid for with fees charged by mortgage financiers Fannie Mae and Freddie Mac over 10 years.

“The policy is horrific,” said Rep. Mo Brooks (R., Ala.) He said that “increasing the costs of mortgages hurts homeowners of all incomes,” adding “it’s hard to figure out how the senators could have done worse–all for two months.

 Meanwhile, Boehner’s procedural tactics are just as suspect:

House speaker agreed to pass the two-month extension on Friday morning by unanimous consent, a fast-track procedural maneuver that guarantees passage unless lawmakers book plane tickets and fly back to Washington in time to object.

“Given the late hour of notification, there’s no way I can make it,” said Rep. Tim Huelskamp (R., Kansas). “I’m disappointed. That’s not the process by which I thought we would consider things like this,” he said, adding “this is the kind of stuff that people hate about Washington.”

In other words, Republicans have “caved” by agreeing to increase mortgage fees for 10 years in order to fund a mere two months worth of tiny tax cuts. Instead of taxes being raised January 1, they go up March 1 instead, while the higher mortgage fees endure for a decade.

Update 12/22: Boehner agreed to the two-month deal today after losing political credibility. He stood by principle, something Americans claim they want, and he got killed for it. We deserve the government we get.

Original Story: The House GOP rejected a 2-month payroll tax cut which was passed by the Senate on Saturday, the day before they took off for vacation.

The two-month delay, which the Senate voted for, was enough time for the Senate to go home for the holidays and for Obama to go on his Hawaiian vacation.

Unfortunately, it wasn’t enough time to implement the plan properly if the House had approved it.

From ABC News: Officials from the policy-neutral National Payroll Reporting Consortium, Inc. have expressed concern to members of Congress that the two-month payroll tax holiday passed by the Senate and supported by President Obama cannot be implemented properly.

Pete Isberg, president of the NPRC today wrote to the key leaders of the relevant committees of the House and Senate, telling them that “insufficient lead time” to implement the complicated change mandated by the legislation means the two-month payroll tax holiday “could create substantial problems, confusion and costs affecting a significant percentage of U.S. employers and employees.”

ABC News obtained a copy of the letter, which can be read HERE. Isberg agreed that it would be fair to characterize his letter as saying that the two-month payroll tax holiday cannot be implemented properly.

Instead of helping employers and employees, it likely would have cost them money. Kudos to the House for doing the right thing and not the political thing because they will pay a political price for this.

What was supposed to happen in two months anyway, the tax increases were to be thrown back at these people in February?  Employers certainly aren’t going to hire with no more certainty than a two month guarantee. How is that paperwork to be executed? It’s common sense that it can’t be done.

The agreement was to give Obama a two-month timeline to decide on whether or not to allow the Keystone XL pipeline. The unions support the pipeline and its potential for 20,000 union jobs, but the Democrats are very uncomfortable with being on the same side as the Republicans. They were looking for a way out of this uneasy alliance.

The House wants a similar bill which extends the payroll tax cut for one year, a time span which would allow proper implementation. Senate Leader, Harry Reid, has refused to return and President Obama is on his way to Hawaii.

The bill also extends jobless benefits and prevents a 27% cut to doctors Medicare payments.

The $33 billion cost was to be financed by a .10 percentage point hike in home loan guarantee fees charged by mortgage giants Fannie Mae and Freddie Mac, which the administration says would raise the monthly payment on a typical $210,000 loan by about $15 a month. Sounds like an accounting trick to me.

 

 

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