The outcome of the impending payroll tax imbroglio seems to be clear.  With Republicans offering spending offsets and Democrats demanding tax increases, my safe premonition is that, for better or worse, the simple tax cut extension will pass, albeit without either “offset” plan.  Due to some divisions among conservatives, such an outcome seems to be intractable at this point.

At this point, we must focus on unemployment benefits with a unified message.  My concern is that all of the proposed GOP packages conflate the passage of the payroll tax cut with UI extension.  We all know that Democrats will abjure all Republican proposals to pay for the package, most notably, cuts to the federal workforce.  The only thing this package will do is telegraph a public message to Democrats and the voters that Republicans agree to the premise of extending unemployment benefits.

As the clock winds down toward Christmas break, and Democrats balk at spending offsets, Republicans will once again be forced to acquiesce to yet another aspect of Obama’s Santa Claus stimulus package.  Worse, conservatives who want to support the tax cut will be forced to vote for a package of unprecedented UI benefits – without any offsets or structural reforms to the program.  By voting for the full package, conservatives will be going on record as supporting UI extension.  Then, the offsets will be jettisoned from the deal by Democrats, forcing conservatives into a no-win situation on the last day of the session.

At the very least, the GOP proposal for UI must be decoupled from the payroll tax bill.

Earlier this week, we laid out the case why Republicans should oppose the entire premise of a 99-week UI extension, irrespective of spending offsets.  They must make it clear to Democrats that they will not pass an extension unless consequential structural reforms are made to the program.  Any serious reform must restructure the program to resemble the insurance plan that originally characterized the program, instead of a new mandatory unfunded liability that resembles more of a European style welfare plan.  Reforms that focus on pocket change from the few millionaires or prisoners who collect UI are non-sequiturs.

Republicans should pass a standalone UI reform bill, and make it clear to Democrats that it is their bottom line.  Then they should go home.

As the program is currently constituted, it must not be extended.  Conservatives understand that we won’t come away with everything from the end-of-year legislative fights.  Nonetheless, we should not walk into a trap of bundling tax cuts with the creation of a defacto permanent entitlement program.

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