As the Wall Street Journal notes this morning, the White House has unveiled “a digital clock at the top of its website, counting down the days, hours, minutes and seconds until the tax cut will expire if Congress doesn’t act.” You can check it out here. Next to the clock is a payroll tax calculator, which lets everyone see how the payroll tax affects them.
The debate over the extension of the payroll-tax cut has made for some strange bedfellows. Last Friday’s U.S. News and World Report’s debate club is a good illustration of this point. In it, I made the case I have made at the Corner before: that extending the payroll-tax cut without equivalent cuts to Social Security benefits is just another promise, a transfer of money to seniors that will have to be paid for by future generations. (The White House clock, by the way, does not calculate that cost to our children.)
Obviously, I am under no illusions that lawmakers will do the right thing and cut spending as they cut the payroll tax, but thankfully, there is a silver lining to this mess (hope springs eternal):
The good news is that this should expose the fiction that Social Security benefits are fully backed by payroll-tax contributions, and hence, can’t be reformed. Social Security is already running a cash-flow deficit, meaning there is not enough money to pay retirees’ benefits. With the payroll tax cut extension adding to the program’s financial difficulties, it may be the impetus for Congress to pursue fundamental entitlement reform and address the underlying drivers of our debt problem.
My hopeful position puts me in the pro-tax-cut-extension camp, which is interesting because most of the “Debate Club” participants on that side are believers in the idea that the payroll-tax cut will be spent by workers rather than saved, stimulating the economy. I totally disagree with this Keynesian understanding. In fact, I agree instead with this piece by the Cato Institute’s Chris Edwards, who makes the case that Keynesian policies have failed and this one will be no different:
Some of the same Keynesian macroeconomists who got it wrong on the recession and stimulus are now claiming that a temporary payroll tax break would boost growth. But as Stanford University economist John Taylor has argued, the supposed benefits of government stimulus have been “built in” or predetermined by the underlying assumptions of the Keynesian models.
The whole “Debate Club” is here.
What's the D's pitch for the tax cut?
"It hasn't worked so far, so we have to try again!"
Does anyone imagine they really want to pass it? Seems to me they're just posing as tax-cutters because they have an election coming up that they are likely to lose. The sole purpose of this proposal is to enable them to make claims in campaign commercials.
Reply to this commentLinkReport AbuseLet's say, for the sake of argument, that it would be spent. So the plan is to go deeper in debt to increase current spending? We're already the world champions at that. If it was a good thing we'd already be in great shape. It's a good idea in the same sense as an alcoholic taking another drink because stopping is unpleasant.
Reply to this commentLinkReport AbuseWell I guess if the Bush tax cuts were a good thing then we would also already be in good shape. So I guess there is no need to renew them.
Reply to this commentLinkReport AbuseWhy don't Republicans EVER point that out?!
When the debt ceiling or the Supercercommittee were in the headlines, Obama piously claimed the tax hikes would be used to pay down the deficit.
But the minute they we no longer in the news, he proposed to spend the new revenues. After the debt ceiling debate he was going to use them to pay for his new JOBS PLAN.
Then the Supercommittee imploded and he demanded the new revenues be used to pay for payroll tax and unemployment relief.
It is now perfectly clear they have no intention of ever paying down the deficit. ALL new revenues will simply get spent on more giveaways to buy votes.
Reply to this commentLinkReport AbuseLots of great debate to be had, if America is up for it:
- Has Social Security become just another welfare program?
- Are some tax cuts more pro-growth than others?
- Isn't our problem on the spending side of the ledger?
- Wouldn't it be better to simplify taxes instead of tinkering?
Well, the "debate" is a short one because the answer to each is yes. But it would be nice if we could make this the occasion to explain the rationale to those who maybe have been watching too many sitcoms to understand why our economy is in the dumper.
Reply to this commentLinkReport Abuse"payroll-tax cut will be spent by workers rather than saved, stimulating the economy."
Sort of like pushing on a string - ?
Reply to this commentLinkReport AbuseI'm guessing the White House website doesn't have a digital clock showing the increase in the national debt under Obama's stewardship. The screen's probably not wide enough.
Reply to this commentLinkReport Abusewait a minute, shouldn't cutting the payroll tax INCREASE the money coming into social security? Tax cuts equal MORE revenue, not less. duh! I've learned that from reading the Corner for years!
Reply to this commentLinkReport AbuseYou may have been reading, but you haven't been comprehending.
Nobody ever said all tax cuts are good. It is quite clear that cutting the marginal rates for the upper incomes help the economy. The tax cuts in question don't do that.
It is also clear that permanent tax cuts are better than temporary tax cuts. These cuts aren't permanent.
It is also clear that the reason cuts in marginal tax rates increase tax revenues is because of the increase in economic activity which causes receipts from all taxes in to increase.
Now, do you want to admit that you are an idiot?
Reply to this commentLinkReport AbuseHold on, Mark. You've stated in numerous posts that taxes are theft by the government. Assuming you're true to your principles, why would any tax cut not be legitimate, indeed, required under your thinking?
Remember that the Bush tax cuts were never legislated as permanent; they originally were sunset at 10 years and then only extended last year for two years. In other words, the "temporary" argument is, to use your favorite expression, a lie.
Reply to this commentLinkReport AbuseI just love the referenced White House website, complete with the typical image of The One not being able to look you in the eye. In this instance he seems to be watching a TV monitor - perhaps following the latest drop in his poll numbers. But then, perhaps he's merely politely listening to the TOTUS.
Reply to this commentLinkReport AbuseH.R. 3551, the Social Security Preservation Through Individual Choice Enhancement Act, would allow an opt in provision to the payroll tax. By doing so, individuals would extend their SS retirement age by one month for each year they opted into the tax cut. This has a very favorable score by the SS actuary and would give people a choice. It would also establish a way that people can voluntarily extend their SS retirement age. This deserves a look.
Reply to this commentLinkReport AbuseTo me this seems a strange issue for the Republicans to dig their heels in on. They have spent the better part of the last year caving on every showdown with Obama, and this of all places is where they are going to make their stand? They could have dug in their heels on defunding Obamacare and Planned Parenthood during the CR debate but did neither. They could have dug in their heels on the Ryan plan or Cut, Cap and Balance during the debt limit debate but did not. Those seemed like eminently better fights to have had, that would have been easier to make the case for, that would have yielder longer term policy gains for the country, and would have been political winners to boot. If our tongue-tied leaders couldn't or wouldn't make their case during those earlier fights, how are they going to make their case on this one?
Why don't they at least propose funding the payroll tax extension by repealing Obamacare in return?
Reply to this commentLinkReport AbuseRepublicans should happily be helping Obama move up Social Security's bankruptcy by several years. The goal is to completely reform Social Security, right? Well, people won't listen as long as the gravy train keeps a-comin.' In the meantime, I plan on plowing my payroll tax cut into my IRA. Boom! A de facto private retirement plan, financed by the government. This is a no brainer, GOP.
Reply to this commentLinkReport AbuseRetirement plannning is a good use of your money, but in your example it is not financed by the government. Your IRA contribution is funded by monies earned in exchange for your labor. There may be a reduction in current taxes for contributing to your IRA, but you earned the income.
Reply to this commentLinkReport AbuseThe payroll tax cut has nothing to do with taxes or cuts or growing the economy or anything else economic.
This is about a fake issue with which Obama is trashing (again) Republicans. The GOP should simply say, "OK, but we want the payroll tax cut to be made permanent for everyone, employees and employers".
Good Lord, we're already a bazillion dollars in debt with no hope in every paying it back. The GOP ought to just help Obama give the train a quick shove over the cliff. Get it over with.
Reply to this commentLinkReport AbuseThis is an incredibly dumb issue for Republicans to have dug their heels in on, they always seems to pick the most politically unpopular issue to make a stink over, then fold on it when everyone is watching. From the get go, the GOP should have said "make it permanent!" and boxed Obama in.
Of course cutting the payroll tax means Social Security will go off a cliff sooner. Good, the quicker we get reform, the better, and if it means the average American sends a thousand dollars less to Washington in the meantime, all the better.
Reply to this commentLinkReport AbuseAgreed. There is also a disturbing pattern apparent at National Review in that the writers here with the exception of McCarthy and Walsh don't even recognize the dimwittedness of the Republican leadership. The default National Review position seems to be that the leadership is smart and crafty and courageous and no one seems to question their decisions. This lack of critical analysis from the writers of William F. Buckley's premier journal of conservative thought is dismaying.
Reply to this commentLinkReport AbuseHow many times do Obama and the Dems get to use their proposed "tax increase on the rich"???
---During the summer's debt ceiling debate they insisted on tax increases on the rich TO PAY DOWN THE DEFICIT.
---As soon as they created the Supercommittee (i.e., got the debt ceiling off the front page), Obama proposed a new JOBS PLAN...to be paid for by new taxes on the rich. He criss crossed the country for months demanding the GOP pass that bill.
---Then the Supercommittee came back in the news. Obama and the Dems again insisted they wanted tax hikes on the rich to PAY DOWN THE DEFICIT.
---When the Supercommittee imploded, the very next day Obama and Harry Reid revealed that they wanted tax hikes on the rich TO PAY FOR EXTENDING PAYROLL TAX REDUCTIONS AND UNEMPLOYMENT BENEFITS.
It should now be undeniably clear by now that any new revenues will never go to reduce the deficit. They will simply use new revenues to pay for new, increased spending.
Why don't Republicans point this out???!!!!
Reply to this commentLinkReport AbuseThe Republicans have cleverly backed themselves into a corner on this one, and are now in checkmate. Nancy Pelosi can barely contain her glee. Mitt Romney has shifted his position to side with the Democrats. External Link
And now there's a countdown clock!
This sort of thing will continue to happen as long as the Republicans don't really stand for anything except mindless, unified opposition to anything the president wants to do.
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