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The Fecal Cliff

All the way down at the bottom of the story as per usual:

Workers who will pay more into the payroll tax: The deal does not extend the payroll tax holiday, which means the federal government will take 6.2 percent from paychecks, as opposed to the 4.2 percent rate in 2012.

Fuck workers! We're going to use our magic robots!

[breaks into chorus of "John Henry," pounds head on desk]

NOTE Oh yeah, the article is divided into "winners" and "losers." I bet you you can't figure out where the workers are!

UPDATE Adding, because the Democrats only care about "the middle class" -- Warren 2016, yeah!!!! -- and by definition the middle class works with their minds, aren't mere beasts of burden, etc. etc. I love the locution "White House Fact Sheet." It's so Orwellian!

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okanogen's picture
Submitted by okanogen on

I think that is more than worth pointing out. If you are on them, it is vital survival money. Vital. Been there, done that.

Submitted by lambert on

It's like being dunked, but never actually drowned.

Submitted by dirac on

I thought the "payroll tax cut" was a social security tax cut, which seems to be win-win for anti-tax people as it's a popular little bullet point for future "negotiations" that also happens to undermine the safety net.

tom allen's picture
Submitted by tom allen on

It went to the unemployed as well as the employed, yet was also implemented for workers by reducing withholding. And it primarily benefitted low and moderate income people, whereas the more you make, the more you benefit with the payroll tax cut. So of course MWP was abandoned in favor of undermining Social Security.

MWP was briefly floated right before the election, but I don't recall hearing about it since.

Comparison chart here.

danps's picture
Submitted by danps on

The credit was "worth 6.2 percent of payroll up to a maximum benefit of $400 for individuals, or $800 for couples." The chart at the link is for a theoretical one double that. For the unemployed who could take advantage of it (see below), MWP was better. For everyone else it's not so clear cut.

The payroll tax cut immediately showed up in people's paychecks; tax credits must be applied for when filing (or was there some other way for people to file), not everyone knows all the items they can take advantage of, and even then they might not want to for other reasons (e.g. those who don't itemize can't claim charitable deductions).

MWP was also a temporary program - it was part of the stimulus. It's not like the payroll tax cut replaced some other program, except to the extent that it was designed to plug a hole that was set to re-open.

Overall it doesn't seem the payroll tax cut was a clearly inferior alternative.

danps's picture
Submitted by danps on

A couple years ago you had literally nothing good to say about the payroll tax holiday, but now that it's lapsed you sing its praises.

Was there some difference then that made it bad policy? Or has your thinking on it changed for some reason? This kind of rapid and unexplained evolution makes you susceptible to the charge of being a perpetually disgruntled liberal who takes the position that if Obama wants it, it's bad - in all circumstances. Obama wants a payroll tax cut? Terrible idea. Obama lets it lapse? Terrible idea. That's not trenchant critique, it's reflexive contrarianism.

tom allen's picture
Submitted by tom allen on

From bad policy to worse; from Making Work Pay, to payroll tax cut, to nothing:

"When they took away the chicken and substituted catfood, you complained about the catfood. Now that they're taking away the catfood as well, you're bitching about that. Stupid perpetually disgruntled liberal!"

danps's picture
Submitted by danps on

Yes, I saw your earlier comment. Did you weigh in to that effect at the time (not a rhetorical question - I'd really like to know)?

Lambert mentioned it in the update here, but I think it's important for connections like that to be made.

As a piece of a general downward trend of increasingly poor substitutions it makes sense. It should be framed that way though.

Submitted by lambert on

If I can summarize my own evolution over a year or so, I began by thinking the politics were terrible -- people believed that they had paid for their own retirement, so the payroll tax holiday endangered Social Secuity. I gradually became convinced that in fact taxes do not "fund" spending, a la MMT, and therefore necessarily we did not pay for our own retirements, even if FDR said that we did (long before we went off the gold standard under Nixon and entered the realm of pure fiat money).

Further, I was convinced by the MMT argument that taxes can be used to regulate the economy: Raise to cool the economy down, lower to heat it up. The payroll tax holiday was a way to implement this policy. So, it makes no sense to make policy based on untruths, and there was a good argument for the policy the MMTers are proposing. (Not perhaps the ideal form of stimulus, but better than nothing.) It seems to have worked, and if the economy nosedives as aggregate demand takes a hit, we will have seen Congress successfully regulate us into a weak recovery, and then successfully regulate us into another recession.

So I changed my mind. What do you do, sir?

danps's picture
Submitted by danps on

That's what I suspected - MMT is the missing piece. It is for me too, incidentally, though I haven't studied it as closely as you. I think it's important to give one's readers some context when switching positions on an issue, especially in as short a period as two years.

I'd be careful about MMT-based advocacy in DC though. Something like the payroll tax holiday might conform to MMT but not be received that way. You might think "vanguard of new economic theory" and the Village might think "great excuse to cut Social Security because It's Not Funded."

okanogen's picture
Submitted by okanogen on

I agree with danps here. Overall, while it is a theoretical (and actual) truth) that tax increases, especially to people who spend every cent they earn immediately, hurt the "recovery", if they are dedicated (politically and legally) to paying Social Security, then the clear signal from cutting them (or leaving them cut) is that cutting Social Security is "fair game". Believe it or don't, there are still many Democrats who do not want to cut Social Security. Ending this particular tax cut was very likely important to them as an argument against Social Security cuts.

We all know that "correct in theory" is often bromide. Wouldn't tax reform that is dramatically progressive be superior, both in theory and practice, than the PTH and its anti-Social Security baggage?

Submitted by lambert on

1. It's not true. At the Federal level, with a fiat currency like our own, taxes do not fund spending. I'm not a big fan of telling truths for political expediency because I don't think the left can afford to do it any more. We've been under successful assault for 30 years (up to and including Obama, so how's that strategy been working out?

2. The tax holiday did what its MMT proponents said it would do: Regulate the economy up in down times. Now taking it away will, I venture to predct, also do what MMT proponents say it will do: Regulate the economy down in down times. We've got at least one half of a policy not only "correct in theory" but correct in fact (regulating the economy by raising and lowering taxes) so why abandon it?

3. The bigger game here is the one the banksters are playing: To make the lie that government is like a household come true. This is the 'living within our means" argument, where that is defined not by the strength of the real economy, but by what we are allowed to borrow from the banksters. Well, if the banksters are running fiscal policy, who's the sovereign? I think it makes for sense to focus on the creating money for public purpose and winning that game than it does to cater to tired politicians, tired bromides, and above all untrue descriptions of how the economy works. Because if the banksters win that game, there's a lot worse to come than cuts to Social Security.

okanogen's picture
Submitted by okanogen on

Despite the theoretical implications of MMT, until the laws are rewritten, the Social Security Trust Fund actually is funded directly by FICA taxes, with debt instruments sold to make up the shortfall, and lo and behold, people are already saying benefits should be reduced ("adjusted") because SSTF adds to the debt. Further, nobody is saying those taxes fund anything BUT Social Security, in other words, they don't fund the war machine. All of these things are actually FACT, which is what you claim you are in favor of promoting. Now for me, I would much prefer a cut in the general income tax, which funds the war machine, than a tax cut towards monies dedicated to funding Social Security. It is actually more upsetting to me on MMT grounds that there wasn't a commensurate tax cut to lower income and working middle class income tax to (more than) offset the payroll tax. Your mileage may vary. Now I also think that is something that Obama, if he had asked for it, could have gotten, so yeah, he's a douchebag.

But in addition, I'm disturbed that you dismiss Unemployment Compensation as "dunking". Have you ever been on unemployment compensation? Ever depended on it being extended because your benefits ran out? Do you not understand how vital it is to people and that it is a fucking VERY GOOD THING those were extended? That they were probably awake nights worrying about it? The fact they are needed at all is of course, bad, but again, reality. That you seem to be shitting on that development (which BTW adheres directly to the best hopes of MMT) lends creedence to charges of being a reflexive scold as danps warned.

okanogen's picture
Submitted by okanogen on

Is it regressive on input or output? Social Security is (in theory) not like a sales tax which pays into a general fund. You are basically making an argument about SS tax inputs/payments, disregarding SS outputs/payments, right?

Submitted by lambert on

"A week is a long time in Washington." I think, frankly, "in as short a time as two years" is one of the more absurd statements I've heard recently ("What do you do, Sir?") And the original discussion this thread recapitulates was a permathread that was hashed out quite thoroughly.

okanogen's picture
Submitted by okanogen on

What I asked is, why not start now doing exactly what you said, meaning decrying military spending as an unfunded expense, which is what I took your terse initial post to mean. Unless you like military spending, or equate military spending on an equal basis with Social Security benefits.

This isn't fucking facebook or twitter, we actually handle precise dialogue here, so please feel free to expand on your thoughts.

tom allen's picture
Submitted by tom allen on

I don't have a link off-hand, but my recollection is that, at the time, I wasn't a huge fan of MWP (it was an inadequate stimulus, for one thing; and stimulus through tax cuts isn't my preferred method, for another.) However, when Obama proposed substituting a "payroll tax holiday" for MWP I thought that was much worse -- the criticism being that it would eat away at SocSec funding, such "temporary tax cuts" generally becoming permanent.

I admit I didn't anticipate the tax cut lapsing and being replaced with nothing without howls of outrage by Republicans concerning "the biggest tax hike ever!" Maybe they're all still recovering from New Year's. Certainly it will be a nasty surprise for most of us who live paycheck to paycheck, and we could do worse than fighting for another round of stimulus and perhaps settling for reinstating MWP.

Miguel Sanchez's picture
Submitted by Miguel Sanchez on

Why not start now? Because taxes don't fund spending

Submitted by dirac on

But, FICA is ostensibly a SS tax. Frame it anyway you want but there's better avenues of stimulus that'd demonstrate MMT principles (although I'm confused since it just makes sense from a Keynesian POV so the PTH doesn't seem terribly novel).

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