Tuesday, December 2, 2008

Print Money and Cut the Payroll Tax



Excellent article by John Makin of the American Enterprise Institute. (Those guys love tax cuts, but this idea happens to be a good one!)

"The best available fiscal policy measure would be a sharp reduction in the payroll tax, which would boost household disposable income while giving firms an incentive to retain more workers on their payrolls. Total annual collections from households and firms of payroll tax levies total about $625 billion, about 7 percent of disposable personal income..."

"The payroll tax is a poorly designed fiscal measure because it acts as a tax on employing labor and, in times of falling demand, a tax on retaining labor. The payroll tax is the primary tax paid by more than 60 percent of American households and so constitutes a marginal disincentive to further work."

"If the payroll tax (of which households pay half directly) were suspended--say, for a year or eighteen months--households would experience an immediate 3.5 percent increase in disposable income that they could employ to sustain consumption and pay down debts. Since the payroll tax is regressive, falling more heavily on lower income households, its repeal would be progressive, while transferring a substantial increase in disposable income to the low-income households who are likely to need it most and therefore likely to spend most of it."

Read entire article here.

3 comments:

Doug said...

http://www.youtube.com/watch?v=2I0QN-FYkpw&eurl=http://thinkmarkets.wordpress.com/2008/11/14/he-who-laughs-last/

Don't listen to this clown.

googleheim said...

An important effect of a strong dollar that the Norman explains should spike ever so stronger ( although the fed swaps are preventing an all out apex of the USD ) is that during the global down turn it would make it harder for foreign entities to gobble up US companies.

e.g. : French electricity company outbiding Warren Buffett for the nuclear plant on the sale blocks. When Argentina got privatized in the 90's, many utilities were sold off to European subsized if NOT nationalized companies. So what was the point of privatization ? so some other nation's nationalized company could buy it ?

completely contradictory

We don't need French control of 1 single nuclear reactor here.

Are the French trying to prohibit Warren Buffett's object model of responsible free marketism from showing if not revealing that French subsized if not nationalized nuclear power is inefficient ?

Evidently the dollar is indeed not strong enough, and what are we to expect from the Japanese building more Toyota plants in non-union south ?

Historically Japanese rich keep their money outside country so actually they probably got pinched by the YEN strengthening against the U$ Dollar

However, as a sovereign country can they not print money without debt obligations to spend their way out of doldrums - and that spending is in the form of investment in overseas places like the USA ?

The YEN is on top of the heap right now.

googleheim said...

What are the chances that Paulson's and Bernanke's loans to European banks are helping the French finance their Nuclear Electricity company to OUTBID Warren Buffett's bid for the nuclear power plant for sale here in the USA ?

This is similar to IMF in the 1990's : loan money to very corrupt Korea state so they can build semiconductor factories that make memory below market prices which directly affected AMD and others in the USA.

We ( via IMF ) subsidized Korean companies to undercut our own companies while Korean officials were bankrupting and skimming their way to the bailout !

Are we doing the same with the current world-wide bailouts ???