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Friday, December 17, 2010

Social Security Tax Cut

Social Security taking in less than it is spending? No problem - cut the payroll tax, run up the debt. After all, China and Russia et al. are still (as of this writing at least)willing to lend to us. Now we can go back to wondering and debating why interest rates are rising.

For Treasury Secretary Geithner et al. here's some news: the economy doesn't respond to temporary measures. Those whose spending we need are scared and will save the 2% break on the payroll tax. For those who aren't scared, it won't make a hill of beans in their overall spending. Stop scratching your heads and wondering why the "cash for clunkers" program was a bust and why the temporary tax breaks didn't resuscitate the real estate market. Businesses understand better than our legislators the folly of hiring on the basis of temporary measures.

We can come up with reasons to support our agendas no matter what the circumstance. We can cut taxes because we have massive "surpluses as far as the eye can see" and we need to give people back "their money" or we can cut taxes because the "Great Recession" is the worst economic downturn since the 1930s. It doesn't matter, either way - Goldman's bonuses are intact.

Let our children worry about the sinkhole. As yields rise and the interest on the national debt climbs, the slice of the pie going to other countries will grow.

Food for thought: next year, this bill's social security tax cut will expire. Will we be able to let it expire? After all, it will be a tax increase at that point; and with high unemployment, who wants to raise taxes?

Much, much better to borrow. And please do me a favor - save the pontifical speech making when we hit up against the debt ceiling.


  1. They should have had a straight up or down on the Bush tax rates without any add-ons, sweeteners or pork. How much more debt can the country support before the house of cards collapses?

  2. "the "cash for clunkers" program was a bust"

    Toyota and Honda would beg to differ.


  3. Spending is the real key. The financing method doesn't matter so long as the spending is out of control. Whether they use taxes or inflate, those resources will be grabbed either way... taxes do have the advantage of being highly visible and painful.

  4. re: Kevin I think that method of financing makes a huge difference. If the government had to raise taxes to pay for wars and all the other programs citizens would pay more attention to what they are paying for. Sort of like when people have to pay cash for things. When they can borrow it becomes much easier. The way the U.S. Treasury works in financing the deficit is a big mystery for most Americans.

  5. I think our country is on a very slippery slope. All I can do is teach my kids endlessly that they must earn money and they must protect it.