The Keystone Ultimatum, Will Obama veto a tax holiday to stop a job-creating pipeline?

◼ If Republicans hang tough, they might even get a useful policy victory in return for giving President Obama his political fillip. - Wall St. Journal

Keep in mind that the payroll tax "cut" is nothing more than a tax holiday. All the political palaver is about extending it for one more year, through 2012, so Mr. Obama can claim he did something for middle-class voters before Election Day. Because it is temporary, the tax holiday will do little to change employer incentives to hire.

The best one can say for the payroll reprieve is that individuals will better spend the money than the government would. The problem is that government will keep spending anyway, borrowing the money instead. The one-year payroll extension will take something like $121 billion from Social Security revenues, which means about 10% to 15% of the entire federal budget deficit expected for this fiscal year.

Congress is now fighting over the details of how to "pay for" this lost revenue with spending cuts. But the only certainty is that most of those cuts will be either notional or pulled from the later years of the 10-year budget window and thus never happen. The real news in this end-of-year political rush is that total federal spending in fiscal 2012 will increase—notwithstanding all the posturing about a new era of spending restraint. Mr. Obama and Senate Democrats have blunted House GOP efforts this year and largely preserved the government they grew so rapidly in 2009-2010.