Economy

Payroll Tax Holiday Special

One of the Obama administration's big recovery ideas at this point is a payroll tax holiday. In terms of stimulus, it's not as effective as spending, but in terms of temporary tax cuts, it has a decent impact with $1.24 in stimulus for every dollar spent.

Here's what I worry about. Right now there's a huge fight over allowing the Bush tax cuts to expire. The expiration was baked into the tax cuts by the Republicans of 2001, knowing that the cuts would create a huge long-term deficit. But now the Republicans are screeching about the Democrats "raising taxes" by allowing that Republican expiration to pass.

Likewise, let's say it's six months from now and the payroll tax holiday is set to expire. The Republicans control Congress and the economy is still sluggish. It's a good bet the Republicans will scream IEEEE! TAX HIKE! when the holiday ends. Maybe a compromise is reached to extend the holiday a little longer. And so on, and so on.

Social Security is gradually de-funded by way of anti-tax screeching.

It's all hypothetical at this point, but this is a program that's constantly under attack, and we should be cautious about anything that might take big chunks out of it.