Tuesday, December 20, 2011

Decryption Required

Help me to understand this. The country needs jobs and we are all supposed to believe that tax relief to low and middle-income wage earners will suddenly flood the market with spending thereby driving factories to expand, tool up and hire thousands of workers creating a Keynesian perfect storm of growth. From my perspective that's partially true and partially political rhetoric.

Now I begin to get confused. The President claims that a 2% reduction in the payroll tax withholding which pays for Social Security can do that sort of stimulating. We've had it for a year now and it doesn't seem to have set the business world on fire. It has been a temporary measure since it was established, everyone knew that, and it expires at the end of the calendar year.

No one is claiming it worked. But, the President has asked, demanded, decreed, or threatened to hold his breath until he gets his way if Congress doesn't extend the payroll tax relief for another year. OK, maybe I'll concede that like chicken soup for a cold, it couldn't hurt. Except for another $120 billion in deficit spending to keep those SS checks flowing to the old folks which might be viewed as a bit of damage.

Here's where it gets weird. The House of Representatives supports a one-year extension and despite being heavily in the Republican majority they take the President's position. The Senate which is in the majority from the President's own party has just passed a ludicrous bill offering a two month continuation of the payroll tax relief and a two month extension of the now longer than three years of unemployment benefits. TWO MONTHS!

The amount of the payroll tax cut is generalized as $1000 for the year. So two months will be about $85 per month. How many folks do you intend to hire with all of that extra cash in hand? How long a contract will you sign with your new workers?

The Democrats howl victory. The House Republicans balk and say they must have a full year extension. And the President claims it is the Republicans who won't let him have his way.

I just don't get it.

1 comment:

Anonymous said...

I'll explain it for you. See, employers like me are massively influenced by a payroll tax that doesn't financially effect me at all.

(so f'ing silly it confounds logic)

See, the payroll tax only effects the employee, not the employer since its not my money in either sense as I'm only taking money from the employee's take home pay and giving it to the country. Changing the amount I withhold from their checks doesn't do diddlysquat for me.