Sometimes you get the feeling that “deficit reduction” really isn’t the goal for some of these people. Because if you’re trying to cut down on the gap between what the government spends and what the government gets in revenues, enacting spending is the last thing you’d want to do.
Unless you’re Democrats, it seems.
Senate Democrats, feeling confident from their net gain of two seats in last week’s election, say any deficit-reduction package negotiated in the coming weeks must include stimulus measures.
They have yet to decide which prime-the-pump measures to push, but are mulling options such as new infrastructure spending and an extension of the payroll tax holiday.
The extension of the payroll tax holiday would be particularly bad policy. It’s a 2% reduction in Social Security taxes. That’s a tiny amount of tax relief, and given the tax holiday’s temporary basis, the “stimulus” impact is almost non-existent.
People don’t change their economic behavior based on a tiny, temporary tax break.
Not to mention the fact that this represents a reduction in Social Security revenues. I’m no great lover of that social program, but it’s fiscal reality is clear. Social Security is in deficit, obligated to pay more in revenues than it receives in revenues, and has been for some time. The program has a trust fund, but it consists of nothing but US treasury bonds, meaning every time Social Security dips into the fund the US Treasury must make good on those bonds.
Adding to our overall national debt.
Continuing this “payroll tax holiday” means accelerating Social Security’s collapse for the sake of marginal economic stimulus, at best.