A Payroll Tax Holiday Paid For By Taxes On The Wealthy

Since actual fiscal stimulus (government spending)is out according to Robert Gibbs, let's hope the next best thing, tax cuts targetted to job creation and the incomes of the working class and the middle class will be the Obama proposal. WaPo reports:

With just two months until the November elections, the White House is seriously weighing a package of business tax breaks - potentially worth hundreds of billions of dollars[. . . .] Among the options under consideration are a temporary payroll-tax holiday and a permanent extension of the now-expired research-and-development tax credit, which rewards companies that conduct research into new technologies within the United States.

Coupled with new middle class income tax cuts (and the expiration of Bush tax cuts for the wealthy), this could be good policy. The issue here though is, Atrios explains, this could be creating raionales for Obama's Catfood Commission to cut Social Security.In any event, the BEST policy options have been taken off the table, real fiscal stimulus. A Lost Decade awaits us.

Speaking for me only

< The Narrative: Obama's Fatal Error (For Congressional Dems) On The Inadequate Stimulus | The Narrative: David Brooks' Fantasy World >
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    Ugh (5.00 / 2) (#1)
    by lilburro on Fri Sep 03, 2010 at 10:50:22 AM EST
    this screams Rahm.  As the WaPo article says:

    More spending on infrastructure, particularly transportation projects, is also under discussion. But it would be easier for a package composed purely of tax cuts to "avoid the stain of a `bailout' or 'stimulus' label," said one official familiar with the talks, speaking on the condition of anonymity because the deliberations were private.

    First of all, are we REALLY conceding debate on the word "stimulus"?  As insufficient as it was, it did save the economy from tanking more.  Seems like political cowardice to me.  

    Sounds like it. "Stain"????? (5.00 / 2) (#2)
    by oculus on Fri Sep 03, 2010 at 10:59:06 AM EST
    A beltway stain (5.00 / 3) (#4)
    by Militarytracy on Fri Sep 03, 2010 at 11:01:08 AM EST
    Not to be confused with a real life stain.

    bring back the blue dress (none / 0) (#8)
    by Dadler on Fri Sep 03, 2010 at 11:48:33 AM EST
    at least clinton had the nads to fight his way through that one. obama can't seem to fight his way through a grocery store crowd.

    please, barack, find your gonads.


    Finding (5.00 / 1) (#23)
    by Ga6thDem on Fri Sep 03, 2010 at 12:58:15 PM EST
    gonads? They're long gone and maybe he never had them. You might as well be wishing for money to fall out of the sky.

    At the moment, (5.00 / 2) (#3)
    by lentinel on Fri Sep 03, 2010 at 11:00:23 AM EST
    there doesn't appear to be much of a likelihood that the Dems will let the Bush tax cuts for the very wealthy expire.

    Tax cuts for companies doing "research" is all well and good - but only if it leads to guaranteed job creation.

    This whole thing spells fizzle.

    If the tax cuts are not allowed to expire (5.00 / 4) (#5)
    by Militarytracy on Fri Sep 03, 2010 at 11:04:57 AM EST
    and we go forth with cutting social security and other entitlements that tells me one thing, we are continuing onward with the Geithner, Summers, and Bernanke recovery plan.  In that plan insolvent banks earn their way back to solvency, and big business will begin to hire when they continue to show profit, and Wall Street somehow magically recovers.  The fact that this will destroy America's middle class does not register because they are convinced the middle class will return as soon as the markets and big business feel like the world is a safe place again.  AND IT IS AN UTTERLY INSANE BELIEF SYSTEM.

    It is the belief system... (5.00 / 2) (#13)
    by Dadler on Fri Sep 03, 2010 at 11:59:22 AM EST
    ...of the kind of subtle sociopath that rules the political day here in the colonies.

    or not so subtle (5.00 / 1) (#14)
    by Dadler on Fri Sep 03, 2010 at 11:59:58 AM EST
    depending on your POV, or IQ ranking.

    And ponies (5.00 / 1) (#15)
    by Zorba on Fri Sep 03, 2010 at 12:02:08 PM EST
    Will there be sparkly ponies?  And fairies sprinkling pixie dust.

    If the payroll tax holiday (5.00 / 2) (#7)
    by gyrfalcon on Fri Sep 03, 2010 at 11:45:49 AM EST
    is for employers' contributions only, it helps the working stiff not at all.

    Even if it's on the employer share only, and even (5.00 / 1) (#10)
    by steviez314 on Fri Sep 03, 2010 at 11:55:10 AM EST
    if it's for new hires only, the Bush tax break for the wealthy would easily cover 6 million unemployed people.

    And if they got jobs, that new demand would help the currently working stiff too.

    They can structure this so many ways to work out well....


    I hope they do! n/t (none / 0) (#25)
    by lilburro on Fri Sep 03, 2010 at 01:36:41 PM EST
    I don't think they are trying to help the working (5.00 / 1) (#11)
    by me only on Fri Sep 03, 2010 at 11:55:56 AM EST
    stiff who already has a job.  They are trying to reduce the cost of hiring, so that the non-working stiff might get a job.

    I can tell ya right now... (5.00 / 5) (#24)
    by kdog on Fri Sep 03, 2010 at 01:12:25 PM EST
    my boss ain't gonna hire during a payroll tax holiday...that money will go right in his pocket.

    Might improve his mood, but it ain't gettin' us some new hires.  


    Please (5.00 / 5) (#28)
    by gyrfalcon on Fri Sep 03, 2010 at 03:24:56 PM EST
    Businesses aren't going to hire people, even if the government picked up their salaries, unless there's demand for their products/services that they can't meet with the staff they already have.

    Or unless long term fatigue is setting in. (none / 0) (#31)
    by EL seattle on Fri Sep 03, 2010 at 04:46:25 PM EST
    After an extended period of time, a workplace can become noticably less efficient if the remaining staff is stretched too thin.  I think that after too many months with too few people doing too many different tasks, productivity starts to suffer, and that doesn't help to pay the bills.  

    I think that if there are some sensible government incentives that will help companies hire (or better yet, to re-hire) workers, that can definitely help things over the long haul.


    It ought to set in soon (none / 0) (#34)
    by Cream City on Fri Sep 03, 2010 at 05:21:18 PM EST
    as I just heard of yet another longtime factory midlevel guy told to take on 60 hours a week.

    Why, he wonders, when both of his sons were among hundreds laid off there last year.  He said, hey, I'm glad to stick to 40 hours to have someone called back.

    But nope.  So demand must be going up . . . but no new jobs created yet, no old jobs back yet.


    I see that as a lack of confidence in (5.00 / 2) (#36)
    by Anne on Fri Sep 03, 2010 at 06:35:53 PM EST
    the increase in demand - no one trusts it.

    Shoot, my firm pared back staff to the bone, and now that it's hiring attorneys again, do you think they are hiring staff?  Hell, no.  My secretary works for five people, three attorneys and two paralegals - and what do you think happens when the only other secretary in the department is out sick or on vacation?  Yep, she works for everyone.

    I think the mindset is that as long as employees  can keep doing more and more and more, why hire?  It makes no sense to me, because in my case, if I have to take on more non-billable functions because my secretary is too busy to do it, that's fewer hours I'm billing.  Billable hours is what drives the whole machine.

    Lots of penny-wise, pound-foolish stuff going on, but that's nothing new.


    Hence why additional (1.00 / 1) (#41)
    by me only on Fri Sep 03, 2010 at 11:05:27 PM EST
    stimulus advocated by BTD and Krugman will NOT work.  Everyone knows it is temporary and does not trust it.

    Plus, unlike the '30's there is real cost in hiring people and letting them go.


    That could be (none / 0) (#37)
    by christinep on Fri Sep 03, 2010 at 06:56:40 PM EST
    My little Mary Sunshine self hope the economists this week are correct, tho.

    The productivity report (none / 0) (#35)
    by christinep on Fri Sep 03, 2010 at 06:04:44 PM EST
    out this week...shows exactly that decrease in productivity. Economic speculation is picking up that the you-can-only-have-slave-labor-so-long aspects of the decrease in productivity should lead to rehiring/increase in hiring. Along with that report, the gains in temporary hiring and the steady (but slow) gains in private sector hiring suggest it may come together...again, slowly, over the coming few months. Perhaps, that is why the heightened reports that the WH will propose a nudge for small businesses via payroll tax holiday or extension of tax breaks on research & development, etc.

    Point well taken (none / 0) (#40)
    by gyrfalcon on Fri Sep 03, 2010 at 10:48:58 PM EST
    but we're still not talking about the large-scale hiring that will make a significant dent in the unemployment rate, I don't think.

    By the way, how are those productivity rates calculated, do you know?  It's quite beyond my comprehension how some sort of mathematical formula applied to GDP numbers could possibly reflect something as inchoate as human productivity.


    How economists calculate (none / 0) (#43)
    by christinep on Sat Sep 04, 2010 at 12:32:33 PM EST
    Darned if I know how productivity is calculated.... It seems to be derived from number of hours worked to produce x product. And, like you, that seems simplistic to me in terms of human aspects. It took me some time to even figure out how "down" (as in productivity) is "up" (as in a good sign under the present circumstances.) And what I figured was really an old saying: You can only get so much blood out of a turnip.

    Turnips and blood (5.00 / 1) (#44)
    by gyrfalcon on Sat Sep 04, 2010 at 04:32:46 PM EST
    Well said.

    Trying to figure out how that would work with services rather than products.  If those are included, it must be based on total sales revenue.  So in a recession, unless people get laid off on a pretty strict ratio to falling sales volume (which only some companies are stupid enough to do), overall productivity must ordinarily go down, no?

    It's a stupid word, since it has strong overtones of virtue to it (or exploitation).  Ah, but silly me, it's an implacable capitalist economic term so those values have no part in the calculations.

    And French workers, for example, presumably have lower "productivity" than Americans, but not because they don't work just as hard or effectively but because French society has decided people deserve long vacations and shorter work weeks.

    Does anybody calculate the wasted, unused potential productivity of the unemployed?  On that score, places like France would do vastly better than the U.S. in a normal economy.

    Just musing here, but the more I think about it, the more the very statistic reeks of the human meat grinder.

    Fascinating article in the NYTimes the other day about how language affects thinking.  Seems to me the very language of capitalist economics reflects and maintains an inhuman attitutude towards us cogs in the machine. (cf the BP chair's concern for "the little people")

    Labor Day indeed.


    Second and third what you say (none / 0) (#45)
    by christinep on Sat Sep 04, 2010 at 06:25:51 PM EST
    Growing up, my whole family--from my dad to the whole extended group--were union people. In PA, the UMW primarily; and, here in Colorado, the Machinists.

    As an aside: One of the more memorable happenstance meetings of my life did occur in the midwest when now-my-husband & I were protesting Vietnam in the late 60's at the Indiana University Memorial Union. We stepped inside with our signs down, and ran into then Senator Bayh (read: Birch) for whom we did political work. Senator Bayh ignored the signs, and introduced us to his "good friend" Walter Reuther.

    Lets hear it for the real meaning of Labor Day.


    It doesn't work that way (5.00 / 1) (#42)
    by Romberry on Sat Sep 04, 2010 at 11:52:14 AM EST
    Businesses hire employees to meet demand. No business is going to add new employees to sit around and fill demand that isn't there. This is a stupid proposal. As Dean Baker said:

    "This is zero stimulus, it's just handing money to employers, a bit lower on my priority list than beating my head against the wall until it bleeds."

    If it does, it will help not only us stiffs, (5.00 / 1) (#18)
    by vicndabx on Fri Sep 03, 2010 at 12:21:35 PM EST
    but the Dems as well.  I have not problem w/a little short-term populist tax relief.

    There are many millions (none / 0) (#38)
    by NYShooter on Fri Sep 03, 2010 at 09:37:14 PM EST
    who only wish they had an income over which to argue how much taxes.

    We placed an ad on Craig's List yesterday for laborers positions. We're in the black-top/seal-coating business. We stated up front, the work is hot, dirty, physically demanding. The pay is $12.00/hr.

    We got 17 applications the first day; 9 were college grads, 3 advanced degrees.

    You can't be human and not have profound pity for these folks, some literally begging for the job.


    So which employer-paid (5.00 / 4) (#17)
    by Zorba on Fri Sep 03, 2010 at 12:17:51 PM EST
    payroll taxes are they talking about?  Social Security, Medicare, or federal unemployment taxes?  Or all of them?  Because, if there is less money (even temporarily) coming into the Social Security system, all that's going to do is give Alan Simpson's Cat Food (pardon me, "Deficit") Commission an even greater excuse to cut Social Security benefits in some way.  Fewer unemployment taxes would tend to scotch any future consideration of extending or increasing unemployment benefits.  Less Medicare revenue will also lead to more talk of cutting Medicare.  But maybe all this is the point.  I don't automatically hate the idea of some business tax relief, especially for small businesses that hire locally, true research and development (more of which is needed), and anything that will get any businesses to start hiring American workers again, but I mistrust the motivations behind this, and how, exactly, it will be applied.  

    I agree with Atrios (5.00 / 7) (#20)
    by MO Blue on Fri Sep 03, 2010 at 12:25:52 PM EST
    that this could be creating raionales for Obama's Catfood Commission to cut Social Security. Tying job creation and economy recovery into reducing the benefits of SS etc. is IMO the current strategy for selling the benefit reductions that will be enacted through the recommendations of the "Cat Food Commission."

    A real break for the middle class... (5.00 / 1) (#19)
    by masslib on Fri Sep 03, 2010 at 12:22:51 PM EST
    would be a payroll tax holiday for all wage earners, not the employers.  That alone would stimulate the economy because wage earners would spend the extra money, whereas you'd see a lot of free riders if you give the cut to employers.  

    The tax breaks for the middle-class in dollar terms actually benefit the wealthy more than the middle-class, and if Obama's proposal to set the dividend tax permanently at 20% instead of returning to 1990's levels of 39.6%, that's another boost to the wealthy.  

    Actually, they might not spend it (none / 0) (#21)
    by me only on Fri Sep 03, 2010 at 12:40:34 PM EST
    the middle class has really worked to get its debt.  That has been a big issue as the middle class is basically overloaded with debt.

    However, paying down debt, while admirable, is not what ails the economy.  Jobs, or lack thereof are the issue.  Paying down debt is not going to help create jobs in the near term.  People who don't have jobs want them.  People whose jobs are at risk are very concerned.  People whose kids are of the age that they will need jobs in the next few years are really, really concerned.

    And, of course, all this translates to some politicians might just lose the most important thing of all, their job.


    Well, there's a much better chance (5.00 / 3) (#26)
    by masslib on Fri Sep 03, 2010 at 02:49:40 PM EST
    the working class will spend additional income than a payroll tax holiday will incentivize hiring.

    According to one argument (none / 0) (#27)
    by me only on Fri Sep 03, 2010 at 03:07:43 PM EST
    that really cannot be proven.  One economist says it does and another says it doesn't.

    Heh (5.00 / 2) (#29)
    by gyrfalcon on Fri Sep 03, 2010 at 03:27:18 PM EST
    Love to know the name of this Martian "one economist" who thinks a payroll tax holiday will incentivize hiring in this economy to any significant degree.

    Probably two: Summers and Goolsbee. (5.00 / 1) (#32)
    by oculus on Fri Sep 03, 2010 at 04:53:32 PM EST
    When (5.00 / 7) (#22)
    by Ga6thDem on Fri Sep 03, 2010 at 12:56:58 PM EST
    oh, when are they going to realize that tax cuts do not create jobs and giving employers tax breaks will do nothing towards helping them hire people because they aren't going to hire ANYONE as long as demand is lacking. These people need an ECON 101 class to learn the basics of supply and demand. Now these half measures could work if it was the 90's and we were having some good times to get employers to hire some people that are hard to employ but this is nothing but a waste of time right now.

    Amen (none / 0) (#30)
    by gyrfalcon on Fri Sep 03, 2010 at 03:27:46 PM EST
    Tell it!

    A payroll tax holiday? (3.25 / 4) (#9)
    by Wile ECoyote on Fri Sep 03, 2010 at 11:55:03 AM EST
    I don't see it.  Pols allowing people to spend their own money?  That would diminish their power.   They would rather shovel the pork out in their name.  

    The tax-holiday might just be (5.00 / 1) (#12)
    by me only on Fri Sep 03, 2010 at 11:56:24 AM EST
    the employer side.

    Yes, let's hope there be some meat on them thar (none / 0) (#6)
    by vicndabx on Fri Sep 03, 2010 at 11:26:02 AM EST
    bones.  Investment (or opportunities for same) is a cornerstone of recovery from recession.  

    Some numbers to keep this in perspective: (none / 0) (#16)
    by steviez314 on Fri Sep 03, 2010 at 12:09:24 PM EST
    Bush's tax cuts for the wealthy will pay for approximately one month of a payroll tax holiday each year.

    On the other hand, it would cover all payroll taxes on every unemployed person in America, each and every year.

    At this stage, if I have more money in (none / 0) (#33)
    by Anne on Fri Sep 03, 2010 at 05:17:25 PM EST
    my pocket, I am going to hang onto it as a hedge against whatever fresh economic hell is waiting around the corner; we won't be out buying TVs and new cars, and taking vacations, but positioning ourselves to weather more storms and preparing for the day - if ever it comes - when we can retire.

    And I'm guessing we are not alone in that mindset.

    If more people (5.00 / 0) (#39)
    by CoralGables on Fri Sep 03, 2010 at 10:21:49 PM EST
    and government took that approach we wouldn't be in the position we are today, but people like government always figured they could just keep spending and the house of cards would hold forever.