A cut in payroll taxes? Heck no.
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.
And it’s worth mentioning that the Dale mentioned by Bruce Webb is our own Coberly.
Link fixed, Thanks,
The point that is recognized here, but probably should be highlighted whenever this issue is discussed, is that it is entirely possible to make a legitimate economic argument for modifying FICA, but that the argument falls outside some folks political views.
A FICA holiday as a spur to employment, from a purely economic point of view, is lovely. Employers can bring on workers for less. (Don’t even start with the “workers pay it all” thing – that’s not necessarily true in the short run, which is what “holiday” implies.) Workers can take home more. Aggregate demand and demand for workers both addressed with a single policy. The answer is “but we KNOW it will be used to argue for less generous SS benefits”. Yeah, we pretty much do. And if my dog bites the neighbor’s kid, that too will be used to argue for a reduction in SS benefits. There is a little political religion forming around FICA. You MUST call it an insurance premium. You CAN’T call it a tax. You MUST receive the wisdom of Roosevelt, that giving SS the look of charity will doom it. So sorry, but I don’t do religion. I understand the urgency of the situation. I appreciate that getting the politics right is important. I just have no patience for twisting our every thought on the subject into a pretzel so nobody screams “FICA ISN’T A TAX!!!” It’s a tax. It’s a premium. Insurance. Wealth transfer. It is what it is. Let’s stop pretending it’s less than it is.
it gives me great pleasure to tell you that you are utterly wrong. FICA “taxes” go back to the people who pay them. the only “wealth transfer” is from your young self to your old self. the insurance aspect could be called a wealth transfer if you are willing to call your fire, auto, home, and medical insurance “wealth transfers.”
as a political matter it is important to keep SS not “the dole.” but as a matter of simple fact, SS is NOT the dole. and that simple fact is actually more important than the political matter because it turns out not even the workers understand the difference any more. but the difference matters.
if you want a spur to the economy… and i don’t think you should… some horses have been spurred enough… you can cut the damn income tax. you could even raise the damn income tax on the rich and send a check to the poor… say poor college professors… but you’d only be fooling yourself.
why don’t we just try playing the game straight for a while and see what that does for us?
Y’all–What is so irresistible about the Trust Fund and the FICA revenues that everybody wants to fix the deficits with them? Seems like they think that SS benefits are unnecessary and the country can do without ’em. And, so they way we pay for them ought to be to vote the money every year so that if we “can’t afford SS benefits”, we just won’t pay them. No soup for them!
If we need to collect more income taxes, alright, we should. I like the tax system to be progressive because it favors me way down here in the median income range. But, if I had more income, I’d pay more taxes and not think a thing of it. I have had more money and paid more taxes in the past. It didn’t kill me. Wouldn’t even if I had to again.
So, I wonder why we have to ruin the last damn thing that works the way it’s supposed to in this country. Practically everything else in the government is employed serving the interest of some hugely rich people in the stock or bond market, the defense establishment, or any one of a number of specific industries such as oil, gas, and coal extraction companies. It would be stupid to take the one thing that actually benefits everyone directly or indirectly and blow it up to pay down a deficit that will just come right back whenever needed to pump up the incomes of the multinationals and the people who control them. NancyO
If I read the comment by kharris correctly, then he’s correct about the FICA being a TAX, which is what I alwats thought it to be, just that it wasn’t refundable when or any part of, when I made out my yearly income tax. Wealth transfer? Perhaps one might view it as such, but what I see taking place today, is the plain simple fact of a population that votes for a Congress that thinks it’s O.K. to spend the Country down the drain in the various rat holes in the World, (not to take it out on the rats) in this so called War on Terror, but that nobody seems to be thrilled to pay out of their pocket for the security our so called leaders say is protecting us from. How about dropping all the facade that’s taking center stage here and get to the meat & potatoes of what should really be the topic? It’s time kick the boggy man out and let the sun shine in. Until the truth is placed before the public, the tax rates are raised so this Country can rebuild its self, then all this talk is just blowing in the wind. I just can’t believe in my hard that all of the people in this country enjoy watching the infrastructure fall apart like it’s doing today! Somebody should poing out to the people wanting the continuation ot tax cuts thatthose pot holes reequire $$$$’s to repair, so, they have to pitch in to bear the costs tooo. After all, are we not in this together? It’s time to change the rhetoric from the so called patriotic sorts todday, to put up or shut up. All the print that has/is being wasted pointing fingers, is not doing a damn thing to change the down hill slide.
Please forgive this old man for his mistakes in spelling, as I’m on ann unfamilure laptop here. Gosh, will wonders never cease, Progress, now this is worth living fo, I just hope I’m able to live long enough to seee more of it. Sory again for the typo’s. Norman
Not to worry, Mr. Norman. I cain’t hardly talk right let alone spell. NancyO
This blog belies its name. Except on Social Security, you bears just aren’t angry enough!
don’t mind the spelling. i lost my internal spell checker years ago. only the eighth graders care.
I know nothing about him. But it is not unusual for even a good guy expert to say dumb things about stuff he knows nothing about just because it’s “in his field.”
I spend a good deal of time thinking about Social Security, and I like to believe I am honest with myself. I find it hard to believe that someone is going to be “right” about SS based on casual reading and applying “economic principles” that he learned in school. The “one minute manager” school of “thought”, while pretty much the norm, is not a good way to understand something more complex than a tiger in the bushes.
on the other hand you want to be careful about calling FICA a “tax.”
of course it’s a tax… the government takes your money.
of course it’s not a tax… the government gives you back your money with interest after carefully saving it for you until you need it… by an elegant sytem called pay as you go with wage indexing.
FICA Federal INSURANCE Contributions Act… of course it’s insurance.
the point is not what is it called, but what does it DO. you can concentrate on the “tax” aspect and miss the point entirely. or you can understand that it is insurance. it has to be a “tax”… and be mandatory… because most people would be too stupid to “buy” it unless forced, and at the time it was enacted the opinion of the Supreme Court was that the country had the power to “tax” but did not have the power to collect insurance premiums.
Sigh. As an issue it won’t fly. As a campaign it is part of the’ spaghettii flung on the wall’ routine, to see if it sticks. If the Perterson machine constantly puts out material on the same theme, why should coberly relax?
Run the numbers through a budget model (old fashioned accounting stuff) and a payroll tax cut likely will not get an employer to the tipping point of another hire, especially not in this economy.
We may get to the desperate point though where any experiment is worth a shot.
maybe any experiment is worth a shot, but why don’t we start with an honest one.
How many of the AB readers commenting on this thread have read Roubini’s article in the Washington Post?
How many who read the article bothered to review the President’s Budget thereafter and compare the FICA revenues for FY2011-2013 to what Roubini stated in the article?
For those who (1) read Roubini’s article, and (2) reviewed the projected FICA revenue stated in the President’s Budget, does the math add up?
How does Roubini make the claim that elimination of the Upper Income tax provisions under the Bush II ear tax cuts will cover the total cost of the lost FICA revenues during the proposed two year period, whether it’s FY2011-12 or FY2012-13? This question applies regardless of the narrowing availability of the FICA tax holiday that Roubini subsequently mentions.
Can anyone make his math work, including the limitations of the FICA tax holiday that he is loosely proposing?
i don’t have time to read everything. but i believe i can show that eliminating the bush tax cuts would pay for the money owed to the Trust Fund. stay tuned.
by “lost FICA” I presume you mean the money that will be needed from the Trust Fund to pay the projected gap between money (to be) collected in taxes and money promised in benefits.
but if you are ready to post an analysis maybe you can scoop me and refute me in one fell swoop.
you had time to make seven comment posts including the one that I am responding to on this thread. Too busy, eh?
So, you didn’t read the article, don’t know what Roubini actually stated, and, naturally, you didn’t look at the President’s Budget because you have said that you have no intention of reading it.
Basically, you have no idea what amount of funds a two year FICA tax holiday would represent if one is discussing elimination of all FICA taxes during the period. Of course, in this case, Roubini indicates that the consideration would be narrowed.
There is no point in posting data on this thread when it appears that the readers commenting haven’t bothered to follow up, read Roubini’s article, or review the FICA revenues as stated in the President’s Budget.
Roubini’s claim is highly questionable.
you didn’t read what i wrote.
you didn’t even read what you wrote.
Your standard personal attacks are part of the intentional dumbing down exercise that has been played at AB for some time. Elementary school junk.
How much FICA funding at the maximum would be involved in a two-year FICA tax holiday?
How much FICA funding would be involved with Roubini’s modified approach?
How much FICA funding is indicated in the President’s Budget proposal based on the projections? You can’t answer that one because, due to your arrogance, you have stated that you have no intention to read the President’s Budget.
What did Roubini actually say in his proposal for a FICA tax holiday?
I agree with kharris to a point. But, giving an effective raise of – what is it, 6.3% – to the average working Joe isn’t much of a solution to anything. Yeah, the guy making $20 per annum can use another $100 a month, but the with an output gap of at least several hundred billion (why can’t I find a current estimate?) how much good is that going to do?
You lost me in your last 2 paragraphs. Are you seriously proposing that the economy shouldn’t be spurred? Or that cutting the income tax would actually do it?
Seriously – what are you talking about?
i am not proposig cutting the income tax. in fact i regularly propose that it should be raised about 3%.
If the economy needs a stimulus it ought to come from spending, not from tax cuts.
But in my heart I don’t think the economy needs to be spurred at all. Growth without limit is a cancer. We need to learn to live a gracious happy life without our neurotic addiction to shiny plastic toys that run on oil.
AS for agreeing with kharris… about a payroll tax holiday… you would be just as wrong as he is.
I originally asked five questions. Nothing more.
Your continued personal attacks are part of the intentional dumbing down exercise that has been played at AB for some time. Elementary school junk.
If that’s all you have to contribute, kindly go away. It’s a waste of time for the 2,000 to 3,500 daily readers.
stop trying to take over this blog. you are only fooling yourself.