Time to Cut the Payroll Tax?

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Alex Tabarrok on a proposal for further economic stimulus:

Support appears to be growing (finally!) for a payroll tax cut.  Here’s Edmund Phelps….[snip]….I argued in favor of a payroll tax cut (and other supply side stimulus ideas) earlier this year so I am in agreement that this is late but still warranted.  Other economists in favor of a payroll tax cut include Keynes, Tyler (in his usual manner), Arnold Kling, Greg Mankiw, Russ Roberts, Robert Reich and Dani Rodrik.  The list could easily be extended and it easily crosses political boundaries.

I don’t know what to think about this idea.  I guess I’ve just gotten too cynical.  On a substantive basis, I’m pretty sure I could be talked into it pretty easily.  It’s fast, it gets a lot of money into the economy, and it benefits the poor and middle class.  Sounds like a good idea.

But….I can’t help wondering: is this just another political trap?  If we cut the payroll tax, then obviously the Social Security trust fund will be in slightly worse shape, and that in turn means that projections of doom and gloom will be pulled forward.  A couple of years from now Republicans will be screaming not that Social Security will be bankrupt in 2040, but that it will be bankrupt in 2035.  Or 2030.  Or whatever.  Something must be done!

I suppose it’s a good idea anyway.  But considering the screeching reaction we’ve gotten lately from Republicans over proposals to rein in Medicare costs — something they were actively in favor of until about two minutes ago — it’s a little hard not to be suspicious these days.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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