“The People to Washington – Grow up!”
Sydney M. Williams
What is amazing to me and I suspect to most Americans is the lack of seriousness among our elected officials in Washington regarding the worst recession since the 1930s. The latest juvenilia flap concerns a two-month extension of the payroll tax cut. Our Washington contingent could learn something from Paul of Taurus, who in his Letter to the Corinthians, wrote, “But when I became a man, I put away childish things.” Childish behavior has become endemic to Washington.
The Republican-controlled House declined to pass the Senate bill for a two-month extension of the payroll tax cut – an easy enough bill to have been approved, as it passed the Senate 89-10 – choosing instead to refer it to committee, which is usual in any bill, as a means to resolve differences between the House and the Senate. Keep in mind that the House is called the “People’s House”, because its members, being elected every two years, tend to vote more in keeping with the wishes of the people. The President claimed that failure of the House to approve the Senate bill “could endanger the U.S. economic recovery” – a patent mistruth. It’s not big enough and, more importantly, it’s temporary. The Senate chose politics and expediency over sound policy; the House voted for policy, but will certainly lose the political battle. Either way, the real losers will be (or would have been) the American people. Taxes will rise in January, given no agreement on the extension. On the other hand, should the Senate bill prevail, the people will simply be given a temporary gift, which could be taken from them in two months or twelve months, and Social Security would be deprived of badly needed revenues.
The payroll, or FICA, tax is levied at 12.4 percent on the first $106,800 of earned income – half paid by the employer and half paid by the employee. In 2011, the employees share was reduced from 6.2 percent to 4.2 percent. The employers share remained unchanged. The two percent reduction amounts to $1000 in annual savings to a worker earning an average wage – not insignificant.
But, where the President is wrong is in what has endangered the recovery (and continues to do so.) It is the temporary nature of the tax cut. To restore confidence, consumers and businesses need a sense that any changes in taxes will be permanent. Temporary measures do not work.
The year 2011, in terms of fiscal policy, has been one of abject failure. In February 2010, President Obama established a deficit reduction committee, headed by Alan Simpson and Erskine Bowles. In December 2010, they reported out a $4 trillion ten-year deficit reduction plan, which was ignored by the President, as the New Year began. The Administration failed to file a budget for the year until months late. The debt-ceiling crisis went down to the wire, finally being signed into law on August 2nd as the Budget Control Act of 2011. Three days later, on August 5th, Standard & Poor’s, for the first time ever, downgraded the credit rating of the U.S. government bonds. During the summer Congress named a 12-member “super committee” to find an additional $1.5 trillion in debt savings over ten years. They were unable to come to agreement. Theoretically, the failure to produce a plan will result in a $1.2 trillion across-the-board cut. We’ll see. In the meantime, public debt rose $1.23 trillion during fiscal 2011, and has risen another $300 billion since.
Thus far, the full impact of the increased debt has been muted by a strengthened Dollar and declining interest rates. Government officials should know that this year’s decline in rates has nothing to do with the fiscal well being of the United States and everything to do with the relative strength of the U.S. economy globally. As the world’s economy slowly recovers, interest rates will rise, because of either real demand or inflation. Either way, the United States has positioned itself for a very real increase in interest costs over the next few years.
Despite the fact that Pete Isberg, President of the non-sectarian National Payroll Reporting Consortium, has questioned the viability of the Senate plan, Republicans have found themselves politically boxed. From a public relations perspective they look like the Grinch that is stealing Christmas for 160,000,000 working Americans. One suggestion that House Republicans (whose fault often is that they are more principled than political) might want to consider would be to pass the identical bill passed by the Senate, but extend its term from February 29 to December 31, 2012. That might serve to put the ball back in the Democrat’s court, allowing the GOP to resume its mantle as the party of tax cutters. It is hard to imagine the President not signing such a bill.
Once this fiasco has passed, it should be incumbent on both parties and the President to put away their childish behavior and begin behaving like the responsible men and women they are supposed to be. The economy needs help. Working to simplify the tax code, eliminating deductions and special credits, lowering the nominal rates and broadening the base is in the interest of all of us. Aldous Huxley once wrote, “That men do not learn very much from the lessons of history is the most important of all the lessons of history.” It is the predictability of permanent tax cuts (to the extent that anything in Washington is permanent, other than idiocy) that would encourage employers to rehire and to get the economy chugging along.
Thought of the Day
“The People to Washington – Grow up!”
December 22, 2011What is amazing to me and I suspect to most Americans is the lack of seriousness among our elected officials in Washington regarding the worst recession since the 1930s. The latest juvenilia flap concerns a two-month extension of the payroll tax cut. Our Washington contingent could learn something from Paul of Taurus, who in his Letter to the Corinthians, wrote, “But when I became a man, I put away childish things.” Childish behavior has become endemic to Washington.
The Republican-controlled House declined to pass the Senate bill for a two-month extension of the payroll tax cut – an easy enough bill to have been approved, as it passed the Senate 89-10 – choosing instead to refer it to committee, which is usual in any bill, as a means to resolve differences between the House and the Senate. Keep in mind that the House is called the “People’s House”, because its members, being elected every two years, tend to vote more in keeping with the wishes of the people. The President claimed that failure of the House to approve the Senate bill “could endanger the U.S. economic recovery” – a patent mistruth. It’s not big enough and, more importantly, it’s temporary. The Senate chose politics and expediency over sound policy; the House voted for policy, but will certainly lose the political battle. Either way, the real losers will be (or would have been) the American people. Taxes will rise in January, given no agreement on the extension. On the other hand, should the Senate bill prevail, the people will simply be given a temporary gift, which could be taken from them in two months or twelve months, and Social Security would be deprived of badly needed revenues.
The payroll, or FICA, tax is levied at 12.4 percent on the first $106,800 of earned income – half paid by the employer and half paid by the employee. In 2011, the employees share was reduced from 6.2 percent to 4.2 percent. The employers share remained unchanged. The two percent reduction amounts to $1000 in annual savings to a worker earning an average wage – not insignificant.
But, where the President is wrong is in what has endangered the recovery (and continues to do so.) It is the temporary nature of the tax cut. To restore confidence, consumers and businesses need a sense that any changes in taxes will be permanent. Temporary measures do not work.
The year 2011, in terms of fiscal policy, has been one of abject failure. In February 2010, President Obama established a deficit reduction committee, headed by Alan Simpson and Erskine Bowles. In December 2010, they reported out a $4 trillion ten-year deficit reduction plan, which was ignored by the President, as the New Year began. The Administration failed to file a budget for the year until months late. The debt-ceiling crisis went down to the wire, finally being signed into law on August 2nd as the Budget Control Act of 2011. Three days later, on August 5th, Standard & Poor’s, for the first time ever, downgraded the credit rating of the U.S. government bonds. During the summer Congress named a 12-member “super committee” to find an additional $1.5 trillion in debt savings over ten years. They were unable to come to agreement. Theoretically, the failure to produce a plan will result in a $1.2 trillion across-the-board cut. We’ll see. In the meantime, public debt rose $1.23 trillion during fiscal 2011, and has risen another $300 billion since.
Thus far, the full impact of the increased debt has been muted by a strengthened Dollar and declining interest rates. Government officials should know that this year’s decline in rates has nothing to do with the fiscal well being of the United States and everything to do with the relative strength of the U.S. economy globally. As the world’s economy slowly recovers, interest rates will rise, because of either real demand or inflation. Either way, the United States has positioned itself for a very real increase in interest costs over the next few years.
Despite the fact that Pete Isberg, President of the non-sectarian National Payroll Reporting Consortium, has questioned the viability of the Senate plan, Republicans have found themselves politically boxed. From a public relations perspective they look like the Grinch that is stealing Christmas for 160,000,000 working Americans. One suggestion that House Republicans (whose fault often is that they are more principled than political) might want to consider would be to pass the identical bill passed by the Senate, but extend its term from February 29 to December 31, 2012. That might serve to put the ball back in the Democrat’s court, allowing the GOP to resume its mantle as the party of tax cutters. It is hard to imagine the President not signing such a bill.
Once this fiasco has passed, it should be incumbent on both parties and the President to put away their childish behavior and begin behaving like the responsible men and women they are supposed to be. The economy needs help. Working to simplify the tax code, eliminating deductions and special credits, lowering the nominal rates and broadening the base is in the interest of all of us. Aldous Huxley once wrote, “That men do not learn very much from the lessons of history is the most important of all the lessons of history.” It is the predictability of permanent tax cuts (to the extent that anything in Washington is permanent, other than idiocy) that would encourage employers to rehire and to get the economy chugging along.
Labels: TOTD
posted by Thought of the Day @ 5:23 AM
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