Obama, Democrats Blink in Payroll Tax Battle

In the standoff over how to best improve the economy, Democrats have blinked.

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It's almost Christmas time again and Washington is right where it is supposed to be around this time of year: at a standstill. Democrats and Republicans remain far apart in negotiations over the payroll tax and annual spending bills. The fight is between Democrats who are campaigning on class warfare themes and Republicans who remain solidly behind the rhetoric of job creation. And in this annual stare down over politics and policy, we just saw the Democrats blink.

[See 2011: The Year in Cartoons.]

Most Washington insiders understand that the kabuki dance over the payroll tax on the middle class will result in its extension. That's why it is interesting to see the change in strategy over how the program will be funded. The key sticking point made by Democrats is about to be tossed over board.  

In a meeting between President Obama and Democrats, they discussed dropping their "surtax on millionaires." This means they likely will abandon this attack over the next few days. The left is now in a weakened position when making their class warfare argument. With millions of Americans without jobs, it makes sense to to argue, as the GOP does, that preventing tax increases on businesses that create growing employment is the right thing to do. It seems obvious that backing the Occupy Wall Street themes of "have and have-nots" may drive the liberal base to make campaign donations, but it doesn't help create a person a new job.

[Read the U.S. News debate: Should the payroll tax cuts be extended?]

When the payroll tax cut is extended, Obama and the Democrats will claim victory over the process. After all, the entire Obama campaign thematic focuses on economic fairness. The left wing will claim they saved the middle class from economic destruction. The left wing will claim that they are on the side of the little guy. But the left wing will not be able to say it helped create the conditions for job growth.

By eventually dropping the demands on the "surtax on millionaires," the Democrats will have telegraphed to every Republican presidential candidate, every incumbent, and every candidate that the class warfare argument is a loser for whoever uses it. This change in direction indicates that the Obama campaign "economic fairness" theme will prove to be a paper tiger. If its strategists decide to stand squarely behind it next year, it will not bring over the independents they need to win key battleground states with high unemployment.

[Check out a roundup of editorial cartoons on the economy.]

Democrats blinked last summer during the debt ceiling negotiations when Republicans demanded fiscal responsibility to stabilize the economy. The GOP is again correct to hold its ground. This cycle is about job growth, not fairness. If the Obama campaign keeps focusing on class warfare, it will lose. If the Republican nominee focuses on job creation, that person there will be in the White House after the November 2012 election.

  • See a slide show of Mort Zuckerman's 5 Ways to Create More Jobs.
  • See political cartoons on Occupy Wall Street.
  • See photos of 2012 GOP candidates.