Prof Barkley Rosser expresses irritation with suggestions of pay roll cuts as stimulus:
In yesterday’s WaPo, accessible as one of Mark Thoma’s general links, http://www.economistsview.typepad.com , Nouriel Roubini sounded very reasonable for anyone addressing the utterly corrupt and degraded “catfish” deficit commission soldouts. He proposed a cut in payroll taxes, to be made revenue neutral by following through on the Bush-mandated end of his own tax cut for those earning more than a quarter of a million a year.
Bruce Webb in comments lifted from Econospeak:
The problem with Roubini and a bunch of left commentators is that they keep coming up with solutions to the wrong problem. Yes we should work to make the tax system more progressive. No we shouldn’t devote those extra revenues to Social Security.
One is the reason Dale brings up, Social Security was set up on an insurance model for very sound reasons.
Two is Rosser’s Equation. Although few people understand this CBO has calculated that 45% of future growth in Social Security costs is due to the formula that has its real benefits as measured in purchasing power growing over time. And as it turns out growing enough that even the projected 22% cut at Trust Fund Depletion still would leave a better real benefit than today. Yes we can and should take steps to shore up those benefits, but not at the cost of taking opportunities to use restored tax progressivity to address a whole bunch of other priorities more pressing than a nominal cut to benefits 27 years from now which may or may not be necessary anyway.
It kills me that in a world where the wealthy are fighting to the death to avoid a restoration of Clinton era top rates that people blithely suggest we can just slap on 4 or 6 or 12.4% on and dedicate it to Social Security. Which won’t need the money for years. Not only is this not productive, it simply feeds the narrative that somehow Social Security is the biggest problem facing us when in reality it should be far down the priority list.
Plus addressing the biggest challenge we have today, which is high unemployment that threatens to become structural has the side effect of fixing Social Security along the way. There is nothing about SS that can’t be fixed with 5% unemployment and 1.5% real wage, achieve that and money rolls in the door to the Trust Funds. I think they call that ‘Win Win’.
Prof. Barley Rosser lifted from comments as well:
Let me say that I probably overdid it in terms of hyperbolically picking on Roubini, whom I mostly respect. It may have been frustration that someone like that was falling for something like this, although the analytics if one could have the politicians behaving are correct: temporarity cutting the fica tax while eliminating the Bush tax cuts for high income folks could be a revenue neutral way of providing some fiscal stimulus. But one could achieve the same result by simply further cuts in income taxes for lower income people.
There is a huge amount of politics behind this, clearly. One can go back to the last period of the Bush presidency when there was a push by Dem Kent Conrad, then Chairman of the Senate Finance Committee along with some high level people in the Bush adminstration to impose a simultaneous benefit cut with a tax increase on the social security system, it being thought this was the only way to sell a tax increase. That got squashed by Cheney, who maintained the “no tax increases” mantra, along with Grover Norquist et al. But the ghost of that, that somehow Social Security is the easy target for reducing the deficit continues to haunt us.