You may have noticed that Senate Minority Leader Mitch McConnell is answering Barack Obama’s call for suggestions on how to create a better stimulus by proposing a two-year suspension of payroll taxes. McConnell’s conservative colleagues in the Senate support the idea, despite the fact that it (1) eliminates funding for Social Security and identifies no replacement, and (2) denies the government a huge portion of its income during a period of massive deficits.
This is a catastrophically bad idea, an idea so bad and so naive and so completely impossible to implement that it almost makes you laugh. But keep in mind, this idea isn’t being proposed by some backbencher in the House Republican caucus. This is the Senate Minority Leader. This is the best Republicans can think up!
It’s this vacuum of solid policy thinking, which gets filled with ideologically driven nonsense, that caused conservative blogger Daniel Ruwe to rip into his brethern. Here’s what he had to say on a slightly different tax idea the Right thought up:
In a December 14 column, Jeff Jacoby proposed completely eliminating all federal taxes for two months—Social Security taxes, income taxes, everything. This scheme caught on—Sean Hannity, Next Gingrich, and Mike Pence, among others, all immediately jumped on board. This plan has become very popular among conservatives.
That’s too bad, because it wouldn’t work. First, the economic irresponsibly of this plan is incredible. The federal budget’s deficit for 2008 is already well over a trillion dollars. Can the government afford to lose a whole sixth of its annual income? Unless the government cuts spending by a sixth (it won’t), the cost of this proposal will only be put off till later. And even if we assume that the plan would stimulate the economy in the short term, it would mean a much higher price in the long run.
Republicans claim to be about fiscal responsibility. Losing a sixth of the nation’s budget (when it is already hard up for money) does not fit that definition.
Anyway, a tax holiday wouldn’t work anyway, for the same reason that stimulus checks don’t. People don’t base their spending habits on the money they have—they base them on the money they are likely to have in the future. So even if Washington did declare a tax holiday, it wouldn’t result in a cornucopia of private spending; instead, consumers would just hoard money for hard times.
Conservatives often complain about unfavorable media coverage portraying them as stupid and economically illiterate. Here’s a suggestion—maybe conservatives should look and see if the media is right.
What was the signature economic idea to come out of the Republican field during the presidential campaign? Can you think of a single one? They utterly failed to make a mark on this issue, which was one of the most important issues in the primary and the most important issue in the general. The closest thing to an economic solution was Mike Huckabee’s “fair tax,” which placed ideology firmly over reality and set the high-water for inane economic thinking.