The Big Unspoken Benefit in Obama’s Payroll Tax Cut Victory

Over at TPM, Kyle Leighton begins to get at an underappreciated aspect of the payroll tax fight that ended (briefly) last week:

Surely, during one of the most severe economic downturns in our nation’s history, Americans of all stripes fastidiously check their paystubs to calculate exactly how much withholding the local, state and federal governments are taking. What’s that? You don’t? You didn’t know that payroll taxes have been reduced by two percent since the beginning of last year?

Well you do now. And that’s the big bonus to the Obama victory on the payroll tax cut, a previously lesser known component of the 2010 deal on the Bush tax cut extension.

Leighton’s point is that the fight over the payroll tax made clear to Americans that Obama has a tax-cutting record. That’s true. But the deeper truth is that the way the Obama administration chose to deliver that tax cut, via small incremental reductions in the payroll tax, was essentially invisible to most Americans—until, that is, there was a big public fight over it.

This is perfect example of what Cornell political scientist Suzanne Mettler, in her brilliant cover story this summer in the Washington Monthly, calls the “submerged state.” By this she means government benefits delivered not in a manner that is obvious to recipients—say, food stamps or Social Security checks with the name of the government of the United States printed on them—but in unobtrusive ways, mostly through the tax code (for instance, deductions for mortgage interest and charitable contributions). Because they are delivered almost invisibly, recipients of these submerged state-type social benefits have little or no sense that they’re getting government help. Moreover, as a percentage of GDP, these submerged state benefits (which go mostly to the affluent) have nearly doubled since 1976, while the value of traditional social benefits (which go predominantly to middle and lower-income people), has generally atrophied.

These trends, Mettler says, fuel “the real if inchoate sense many Americans have that government has been “growing,” as measured by deficits and new programs, but in ways that don’t benefit them.” Therefore, making submerged state programs visible ought to be a key progressive goal. Seen in that light, Obama’s win over the payroll tax cut could an even bigger victory than people recognize.

Mettler’s piece exemplifies the kind of work the Washington Monthly aspires to do—carefully-researched, clearly-argued stories that make us see politics in profoundly new and helpful ways. If you value that kind of work, not to mention the daily dose of fresh thinking you get from this blog, now’s your chance to support it. We’re in the midst of our annual year-end fundraising drive, so click here and toss in a few bucks–$10, $20, $30, $50, whatever you can afford. Donations to the Monthly are tax-deductible — we’re a non-profit outfit, and really appreciate and rely on the help we get from readers to continue to do what we do.

Paul Glastris

Paul Glastris is the editor in chief of the Washington Monthly.