This is a follow-up on yesterday’s post. There are reports that, because of the weakening economy, the Obama administration is considering a continuation, and expansion, of this year’s social security tax cut.* As part of the big tax package last Christmas season, the social security tax on employees was cut, for 2011 only, from 6.2% to 4.2%. In an effort to create more jobs, the Administration is now thinking about extending this cut another year – and expanding it to cut the employer’s 6.2% tax, too.
This is not a good idea. First, it would really increase the deficit, and without a credible medium-term deficit reduction plan in place, that is a terrible idea.
Second, it’s not going to help the economy in any kind of a sustained way. We don’t need more short-term gimmicks, like the one-time tax rebates during the George W. Bush administration or the first-time home buyer and cash-for-clunkers programs the Obama administration has given us. These temporary programs haven’t helped in any significant way in the past, and they are not going to help in the future, either.
Instead of more quick-fixes that don’t work, we need policy improvements that will last, so people and businesses can rely on them – and act on them.
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* Damian Paletta and Carol E. Lee, “Payroll Tax Cut Idea Joins Debt Talks,” The Wall Street Journal, June 15, 2011.
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