Josh Barro on Payroll Tax Pay-Fors
In the Washington Examiner, Josh Barro argues that finding “pay-fors” for a temporary payroll tax cut is a fool’s errand:
Congress has gotten hung up on the issue of how to “pay for” the payroll tax holiday, and indeed the main reason the Senate passed a 60-day extension is that bipartisan agreement could only be reached on enough “pay-fors” to cover 60 days. But the idea of a “pay-for” is a red herring and should be abandoned. …
[T]he payroll-tax holiday is a fiscal stimulus measure: The whole point of the policy is that it leads to larger deficits for a period. The needs for fiscal loosening in the short term and tightening in the long term are real, but that does not necessarily mean they should be included in the same bill. A pay-for requirement might make sense if we are worried that, once the economy improves, Congress won’t have the tools it needs to do the necessary fiscal tightening. But five automatic triggers are already in place that would sharply shrink deficits in the coming years without any congressional action.
Josh makes a strong case.