Time to Cut the Payroll Tax?
Alex Tabarrok on a proposal for further economic stimulus:
Support appears to be growing (finally!) for a payroll tax cut. Here's Edmund Phelps....[snip]....I argued in favor of a payroll tax cut (and other supply side stimulus ideas) earlier this year so I am in agreement that this is late but still warranted. Other economists in favor of a payroll tax cut include Keynes, Tyler (in his usual manner), Arnold Kling, Greg Mankiw, Russ Roberts, Robert Reich and Dani Rodrik. The list could easily be extended and it easily crosses political boundaries.
I don't know what to think about this idea. I guess I've just gotten too cynical. On a substantive basis, I'm pretty sure I could be talked into it pretty easily. It's fast, it gets a lot of money into the economy, and it benefits the poor and middle class. Sounds like a good idea.
But....I can't help wondering: is this just another political trap? If we cut the payroll tax, then obviously the Social Security trust fund will be in slightly worse shape, and that in turn means that projections of doom and gloom will be pulled forward. A couple of years from now Republicans will be screaming not that Social Security will be bankrupt in 2040, but that it will be bankrupt in 2035. Or 2030. Or whatever. Something must be done!
I suppose it's a good idea anyway. But considering the screeching reaction we've gotten lately from Republicans over proposals to rein in Medicare costs — something they were actively in favor of until about two minutes ago — it's a little hard not to be suspicious these days.