Having walked into an ambush, the House GOP was right to capitulate on the pathetic bill to extend the pathetic payroll tax holiday for two months. As Charles Krauthammer observes, they were right on the policy but this was “absolutely the wrong place, the wrong time, to plant the flag.”

Using a hypothetical head of household who earns $50,000, Douglas Holtz-Eagin, former director of the Congressional Budget Office lays out the difference between a two-month and 12-month extension of the payroll tax holiday:  

Based on the above and running the numbers, the household head would spend $49,290 (inflation-adjusted) annually, borrowing up front, saving during the later part of her career, and living off the surpluses during retirement. What does a 2 percent payroll-tax holiday of $1,000 do for the worker? Adjusting the numbers, she would spend $49,335 — a massive “stimulus” of $45. The bulk of the holiday would be saved.

This is hardly a surprising result. By and large, the holiday is the moral equivalent of sending the worker a check. The U.S. sent checks in 2001 and again in 2008 — and was disappointed each time. (Fool me once, shame on you. Fool me twice, shame on me. Fool me three times?)

Now, suppose that instead our worker can only anticipate one-sixth of the holiday — two months. She spends $49,298. That is, the inability to lock in the full year knocks $37 dollars (82 percent) of the impact off the books….

[A] two-month extension is a policy air-ball. Period. This dispute is about politics, pure and simple.

There is only one provision of the bill that holds out any hope of improving the economy. The Wall Street Journal notes:

The only potential job creator in the Senate bill is the plank requiring Mr. Obama to make a decision in 60 days on the Keystone XL pipeline.

And he might ruin that by killing the pipeline to please his rich green supporters who think you can power a modern economy with windmills, solar cells and switchgrass.

The Democrats may have done harm to their own side, however, for this cynical,  short-term gain. Investor’s Business Daily observes that the payroll tax holiday extension could be the end of Social Security. David Hogberg writes:

Washington appeared Thursday to agree on a short-term payroll tax extension, almost certainly not for the last time. Some say it will become a "permanently temporary" fix that has far-reaching consequences.

"We could be having this conversation 15 years from now and talking about how President Obama, as a Democrat, was the president that started the path to killing Social Security," said Jason Fichtner, a senior fellow at the libertarian Mercatus Center.