The extension of the FICA/payroll tax cut has been addressed by both Republicans and Democrats lately but in reality it's not a tax cut at all. All of the revenues that are lost because of the temporary reduction in the FICA/payroll tax rates have to be replaced with tax revenues from general taxation. It isn't a tax cut but instead it's a reassignment of sources for the tax revenues required for Social Security/Medicare. We're already saddled with general tax revenues have to be used to repay borrowing for general expendatures where the funds were borrowed from the Social Security Trust Fund and now even more general fund revenues are being diverted to Social Security. We don't even have the revenues to pay for our current expendatures to this is really being funded with more deficit spending. I thought both Republicans and Democrats were opposed to the huge trillion dollar deficits and yet both are voting to increase spending even more. We can also look at who these tax "breaks" benefit and they only apply to workers with a job. We don't have a problem with working people right now, we have a problem with the unemployed and they won't benefit at all from this "reassignment" of funding sources from FICA/Payroll taxes to general fund taxes. Finally, Social Security/Medicare were established based upon dedicated FICA/Payroll taxes but by supporting the initial FICA/Payroll tax rate reductions to be paid for with general tax revenues the Republicans have now established the precedent that Social Security/Medicare is not limited to just FICA/Payroll tax revenues. In the future when Social Security/Medicare become insolvent, and they will, the Democrats will be able to point back to 2010-2013 and say to the Republicans, "You supported funding Social Security/Medicare before with general tax revenues so why don't we just do that again." It's a stupid and misreprested "tax cut" that doesn't cut taxes at all, increases the deficits spending and establishes a bad precedent.
We could always, I don't know, spend less and tax people less. Oh wait, who am I kidding? We need the government to fund penis pump research and finance car companies in Denmark.
Your analysis of course applies equally to all deficit financed tax cuts, including the Reagan and Bush tax cuts as well. If you want to stimulate the economy, the payroll tax cut at least makes more sense as the extra money is more likely to actually be spent.
I totaly agree. Pay roll tax cut is nothing more than Booooooosh tax cuts with a new name. It will only continue the stagnation and decline of the US Economy. Lets look at the blue print of Clinton and take that into account, and cutt all the war funding. Not the military, just the funding of Afgan and Iraq contract money, mix quick, place in oven of 900 degrees, and let sit for 3 years and economc problems solved.
That is also true as many of the arguments against the extension of the FICA/Payroll tax cuts would also apply to general tax cuts with the exclusion of the "reallocation of tax dollars" which is exclusively related to the dedicated taxes for Social Security/Medicare. Actually what has been shown is that people aren't using this average $1000 less in taxes for spending on consumer goods. They've been predominately spending it to pay-down their heavy debt burden. We actually don't have a problem with consumer spending today related to employed workers. It the unemployed that have a severe limitation on their spending and, as noted, this so-call "tax cut" doesn't benefit them at all. Today we have a huge problem with the lack of income represented by the depression in the housing market that resulted in high unemployment. Until the surplus of homes resulting from foreclosures are consumed there won't be a recovery putting residential construction worker back to work. Of course we won't need as many new homes even then as we did during the "housing boom" were easy credit and speculation resulted in too many new homes being built. A lot of workers are going to need to find a new means of employment just like we was in the auto industry.
Not when the government is deficit spending. We learned that from the Bush era tax cuts where the Bush adminstration virtually doubled the national debt. It's getting worse under the Obama administration as the dollar amount of the deficits is far greater than under Bush even though the national debt percentage increase is less.
Deficit spending is a separate decision. If the government had to pay market interst rates it would no be such a big deal.
The problem Shiva, is that you don't understand the question of timing. If the economy is booming, the Federal budget is in deficit and inflation is rampant then this tax cut would be stupid because it would fuel inflation and increase the deficit. However the economy is not booming, inflation is not an issue and the real issue is that the American economy is stuck in a liquidity trap. Investors won't invest because there is nothing worth investing in, inflation is low so they may as well just hold cash. What is required now is more inflation not less, because that will generate an effective "negative interest rate" and start the spending that will stimulate economic activity and generate jobs. Please don't start the "business confidence" BS either. There is no "confidence fairy" go look at what is happening in Ireland - "Austerity" dampens economic activity - which further erodes Government tax revenues - which prompts calls for more Government spending cuts. It's a vicious circle. We need the jobs and economic activity right now. You pay the deficit off when the economy recovers.
If the government didn't intervene in the interest rates the cost of money would be around 5% which would make the interest payment on the authorized $15 trillion national debt $750 billion per year or over half of all general tax revenues. I would call that a big deal because general taxation, predominately income taxes, would have to rise significantly just to pay the interest on the debt.
The point was that it would be impossible to run such high deficits if you had to find people to lend you that money voluntarily.
Inflation is nothing but the theft of labor that is stored as "money" so the first failure of this argument is that the government should be engaged in theft. Next is the problem that 1830, or 180 years ago, was the last time the US government seriously addressed paying off the national debt and we've had numerous time periods where the economy was booming. What we see is that when the economy is booming the deficits increase as opposed to decreasing. It could possibly be a valid argument to make if the US government paid off the national debt and then borrowed in times of economic emergencies but that is not the case. During the Bush adminstration which basically had a boom economy until the 2008 recession the national debt almost doubled. Officially the recession ended in 2009 although there is residual unemployment related to it. We should have a balanced budget today but we don't. If nothing more we should have a projected balanced budget in three years when virtually all economists predict that the residual effects of the recession will basically be over but we don't. We should have a projected surplus budget to pay down the national debt sometime within the next ten years but we don't. History doesn't support the opinion nor do current projected budgets support the opinion and the opinion related to the government resorting to the theft of labor through inflating of the money supply, which the government has been engaged in for almost 100 years, really needs to go into the trash can.
We couldn't have such high deficits if the actual borrowing was of lawful money (i.e. gold and silver coins being produced by the US Mint under the Gold Billion Coin Act of 1965). Instead the US government issues promissory notes (T-Bills) and accepts promissory notes (Federal Reserve notes) in return. The entire national debt is based upon promissory notes that cannot be redeemed in the money they promise. With the current national debt equal to about 300 billion ounces of gold, or 300 billion $50 American Gold Eagles, it is true that the government could never have borrowed this amount of gold coins.
Shiva, economics is not a morality play. Furthermore, just because America is incapable of implementing sound economic policy does not make that policy prescription invalid. Australia had a mountain of Federal Government debt at one time but we paid it down to zero over Ten years and only recently allowed it to increase to around 18% GDP. As for inflation being "morally bad" (ie: Theft) that is irrelevant when you are stuck in a liquidity trap. Official interest rates in the U.S. are virtually zero. In a normal economy, lowering interest rates is a signal for businesses and consumers to borrow and either spend or invest. In a liquidity trap that does not work and instead people sit on cash because there is no motivation to either spend or invest it. What is required now is a little inflation to prompt businesses and investors into a "use it or lose it" expectation because that will get the cash flowing again. At present, there is no penalty for holding cash and just sitting on the sidelines, hoping things will get worse and trying to pick the bottom of the market. Now a confession, that is exactly what I'm doing at the moment. I'm out of the stock markets and my savings and investments are in term deposits. I'm hoping that the world economy gets worse because that makes my cash more valuable. I'm hoping that the European banks crash because that will cause the American Banks to do likewise. That will bring down home lending by the already scared Australian Banks and hopefully shave Thirty to Forty percent off Australias over valued real estate market. I'm in the market for a new house plus an investment property, but I'm not going to buy until either the market crashes or Government caused inflation pushes me into buying to save my investments. I suppose it is in my interests to yell publicly for "Austerity" and sound money, but because I'm not a hypocrite I won't.
it is not stupid at all but a well calculated manipulation by democrats against those cheap republicans see our plan is to set this precedent so that we can eventually force the rich to pay for social security as it has alot of voting power behind it and the American public will choose the rich minority to pay for this entitlement first before themselves so all in all now that general tax revenues has been used to fund our social welfares we are one step closer to raising taxes on everyone to fullfil a broader socialized system in the future
What else must these people do for you? The provide you with jobs, cheap goods, cheap energy, and now you want them to pay for your retirement?
There is a quote I read that basically summed why this passed without opposition that went something like this: We have two parties in America, the stupid party (GOP) and the evil party (DEMS) and every once and awhile congress comes up with an idea that is both stupid and evil like the payroll cut. That's when we get bipartisianship. And no, tax cuts are not a good idea always. The tax code is already far too progressive. Cutting taxes on people who already have a negative rate of income taxation is not a good idea unless you are well, stupid or evil.
Look, I'm all for shrinking the size of government. But all we are doing here is shrinking the ratio of net water carriers to net water drinkers.
It isn't about morality, it's about contract law. When any entity issues a promissory note it establishes a contract. The US government issues promissory notes in the form of T-bills. It promises to redeem those in money. The note is not money but is the promise of money. In return the Federal Reserve issues it's own promissory notes, Federal Reserve notes, that it also promises to redeem in money. That note, while legal tender, is not money but the promise of money. It is legal tender and used in lieu of money because it promises redemption in lawful money. Basically the US government is not receiving money when it borrows by issuing T-Bills but instead is merely accepting a promise of money from the Federal Reserve either directly or by the use of Federal Reserve notes in our economy. It is a promise for a promise. The problem is that an individual cannot redeem either the contractual promise of money as represented by the T-Bill or the promise of money as represented by the Federal Reserve note. These are "bearer" notes and the refusal of the issuing parties to redeem the notes to the bearer of the notes is a violation of contract law. That represents theft by the issuer of the note.
Shiva, I don't follow your convoluted argument, nor do I need to because it flies in the face of human nature even if I could follow your logic which seems to be about some curious American structural issues about the way money is produced in America, coupled with a misunderstanding about what money actually is.... "The value of a thing is what it will bring" is the ancient legal maxim determining the value of anything That value may be in terms of money, sheep, wives, cattle gold, etc.. Money is simply a medium of exchange. It has no intrinsic value in itself, it is a piece of paper. Even if it is backed by gold, it still has a relative value because it is now how much gold it takes to buy a house, cow, sheep, etc. I suggest you study Economics 101 and the topic of money supply. Basically, Governments print money in line with Economic growth so that the amount of money available matches the goods available, in which case there is zero inflation. If the supply of money lags, then there is deflation, if it leads, there is inflation. Government "owns" the extra money it prints (called seigneurage) and gets to spend it. It is accepted economics that Government has every right to manage the overall health of the economy, in fact we agree that it has a responsibility to manage it, otherwise robber barons will do it for you if you don't - with the accompanying booms and busts being much worse than anything you have experienced. Part of that responsibility is to manage people expectations of the future value of the currency. Do I have to point out the devastating economic consequences of an expectation that tomorrow a dollar is going to buy more goods than it did today? Do you understand that? There is a thing called too much saving and not enough spending. Please note, this is not about morality or theft. Every time you buy something, you make a decision about its future value. For example, do you buy a house and expect it to be worth exactly the same money in Ten years time or perhaps a little more? If the answer is yes, then you are accepting of inflation of the currency. There are more lucid explanations of this matter elsewhere than I can produce on Christmas morning. Don't believe the "Hard money" BS being put around. It would greatly suit me if America followed such practices in the very short term because I have zero debt and a reasonable amount of money to invest. In the long term such practices would cripple your economy. To put it another way; just like individuals are allowed to borrow and save, so is the Government. Printing money is part of that Government process.
A couple of correct statements along with a false statement. Money was a common commodity developed to facilitate the barter system. As a commodity it has relative value related to other commodities. Legal Tender currency under US law and the US Constitution is not money but is a promissory note that is redeemable in lawful money. It is legal for all debts public and private because it promises redemption in lawful money but it is not money. A promissory note is not what it promises. Under contract law the entity issuing a promissory note, in the case of the United States it's the Federal Reserve Banks, has a contractual obligation to redeem that note. Lawful money in the United States, which is also legal tender, have always been gold, silver and recently added platinum coins. A $50 Federal Reserve note is a legal tender promissory note that states it can be redeemed for a $50 coin (lawful money) as defined by the US Congress. While the US Congress has defined lawful money starting in 1792 and it was most recently redefined by the Gold Bullion Coin Act of 1985. Under that statute a $50 coin that is lawful money is a gold coin that contains one ounce of pure gold. Based upon the current laws of the United States the US government, just based upon the national debt, owes the holders of US promissory (Federal Reserve) notes about 300 billion ounces of gold. That is a contractual obligation. The US government cannot "create money" nor does the US Constitution allow it. The US Constitution limits and delegates the role to the US government to "coin money" and that is the manufacture of gold and silver coins. The US government cannot create the gold or silver, which is the actual common commodity developed in the "barter system" or "raw" money, but instead can only manufacture "lawful money" by coining "raw" money into coins of specificed metallic alloy content and weight. As noted the most recent coinage act in the United States was the Gold Bullion Coin Act of 1985. While this has been the majority opinion of economics based upon Keynesian economic philosophies it is not the only economic philosophy and has also proven to be corrupt and incompetent. Laisse Faire capitalism, which is also a well know and accepted economic philosophy is also accepted albeit by a minority of governments. Laisse Faire capitalism limits government interventionism to only those laws and regulations that protect the property Rights of the People. For example regulations that prevent "robber barons" from engaging in monopolies or unfair business practices are mandated under Laisse Faire capitalism. I would also cite the fact that "Capitalism 101" requires the enforcement of contracts. It would prohibit the government from printing promissory notes that promise redemption in gold and silver coins and then refusing to redeem those notes. That would constitute fraud and theft under contract law. TITLE 31 > SUBTITLE IV > CHAPTER 51 > SUBCHAPTER II > § 5119 actually requires the US Treasury to issue enough gold coins to maintain equal purchasing power between the two different forms of legal tender in the United States (i.e. Coins and Currency) but it is obviously not doing this as a person cannot exchange a $50 Federal Reserve note for a $50 American Gold Eagle in the free market. I'm "one of the people" and my expectation is that the US Government and the Federal Reserve banks comply with US statutory law with this one in particular: http://www.law.cornell.edu/uscode/html/uscode12/usc_sec_12_00000411----000-.html The US government and the Federal Reserve banks will not redeem Federal Reserve notes in the lawful gold and silver coins being produced by the US Mint on demand as specified in this law. My expectation is that the government and the bank should be required to comply with the law. This is sadly funny. We've actually seen Federal Reserve notes lose over 97% of their purchasing power since being introduced and somehow losing value is acceptable but possibly gaining value is not. Of course, in reality, during the same time period a $50 US gold coin can purchase relatively the same amount of other commodities when all other factors are considered. Gold and silver coins are relatively stable when it comes to purchasing power but Federal Reserve notes have a history of constantly declining purchasing power. Cutting this short..... The failure to redeem a promissory note in that which is promised is theft and is a violation of contract law and could rightfully be considered immoral. The laws of the United States specifically establish that Federal Reserve notes are redeemable in lawful gold and silver coins being produced by the US mint as well as establishing that the US Treasury is to produce enough gold and silver coins to ensure the equal purchasing power of all legal tender currency (coins and promissory notes) in the United States. Niether of these laws are being enforced. When the United States government starts enforcing the laws related to the money of the United States then I'll be quite satisfied. Arguments that these laws should be ignored are invalid.
