Let's deal with the probable unintended consequences related to the latest maneuver by Speaker Boehner and the House Republicans. It appears that their efforts will help to re-elect President Obama in 2012.
In another example of history rhyming, if not repeating itself, this latest self inflicted Republican wound reminds me of the post 1994 election government shutdown and how Newt Gingrich was then outmaneuvered by Bill Clinton.
It seems that Newt learned a painful lesson from that long ago experience. See Gingrich to House GOP: Give In on Payroll Tax.
In any event, the aftermath of Newt's winning off-year election revolution in 1994 helped to re-elect President Clinton in 1996. Could the aftermath of the Tea Party's triumph in 2010 lead to a similar but unintended Obama victory in 2012? Stay tuned.
To me, it looks like the House Republicans are very much up to their old tricks. If so, Barack Obama and the Democrats are likely to be the unintended beneficiaries in 2012.
Let's look closely at the latest Republican shoot-yourself-in-the-foot example.
The politicians are ending 2011 by fighting over how long, not whether, to extend the "targeted and temporary" social security related payroll tax break which was enacted for 2011. The current fiasco appears to be about whether to extend the "tax holiday" for another year or only two months. In fact, most of the Republicans want a year's extension, and so do the Democrats, but other issues are causing the political circus to continue into year end and maybe beyond.
My take is simple; let's make the extension permanent for the 160 million workers.
Anytime we can send less hard earned money to the government for redistribution, we should do so. Thus, why the Republicans haven't already agreed to the full year extension is beyond my comprehension. In fact, I'd have expected them to make the case for a permanent reduction in payroll taxes.
Besides that, no employer will hire any more people for a one year tax break. To have any effect at all, the tax reduction would have to be permanent.
Now let's look at a related matter. Another 60 million Social Security recipients will see their benefits increased by 3.6% in January, 2012.
That's right; taxes decrease while benefits increase. Only in America!
So the tax for paying social security benefits was decreased on ~160,000,000 voters--er--workers in 2011. And benefits will increase for 60 million voting retirees in 2012. We'll get to the unemployed voters shortly.
First, let's look briefly at the politics. 160 million workers pay less in taxes and all the old folks receive more in benefits. And the unemployed won't be left out either. Free lunches abound.
What to do about 2012 and beyond? My vote is just keep paying fewer taxes and if funds later run out to pay benefits, we can just stop paying them as well. Either that or deal with the long term social security issue as a whole. Now or sometime before the funds run out, probably in approximately 20 years or so. A lot can and will happen in the next twenty years.
And permanent tax reduction appears to be something neither party wants to do. They're just jockeying for position in the 2012 elections. The Democratic jockeys are looking good right now, thanks to the Republicans.
Next we have the "targeted and temporary" 99 week unemployment benefits payments which were legislated to help us through this period of economic stress. Like the payroll tax breaks, the extended unemployment benefits were enacted to help bridge the effects of a weak economy. Of course, the stress of a weak economy will remain throughout 2012, so guess what will happen next year.
Next there's the annual "targeted and temporary" Medicare "Doc fix" payments. This simply means that year end legislation is required if we intend to pay doctors for medicare treatments in 2012 that which they are being paid today. If legislation doesn't occur, their pay will decrease by 27%. That won't happen either.
So why not just make the Doc fix permanent? Well, then our games playing politicians would have to acknowledge that Medicare is even more financially unstable than it appears to be currently.
Finally, we have the U.S. jobs providing and North American energy providing pipeline project which the greens don't want, but the union workers do want. That poses a problem for the Dems. Democrats want to win in 2012, so they want to do nothing until after the election. They don't want to upset their base. Meanwhile, Republicans are allowing this issue to get lost in the year end payroll tax extension debate.
Let's summarize. Republicans are afraid to oppose the payroll tax extension in total, and they are also afraid to recommend a comprehensive permanent social security fix. So they punt.
Democrats want votes in 2012 so they want "middle tax" tax cuts before the election. On the pipeline, they punt, too. They also punt about even considering a permanent social security payroll tax reduction at this time. That appears to suit the Republicans just fine.
And what about paying for a continuing annual ~$100 billion payroll tax reduction? Well, here's the math.
We owe about 100 trillion dollars for debt repayments and unfunded entitlement promises that will have to be paid in the future. According to my general math, a permanent annual payroll tax reduction of ~ one hundred billion dollars is about one one thousandth of one hundred trillion dollars (.001). When considered in that context, it's not even worth considering.
Yet this not-worth-considering amount is currently the subject of the big year end political battle which the apparently self destructing Republicans are unintentionally insisting that the Democrats win. If that happens, it may very well help determine the outcome of the 2012 election results.
Four more years indeed! We can't stand that from either party acting the way they do now.
To repeat, we the people should work hard to keep government from extending its financial reach every opportunity we get. Thus, the politicians of both parties should be encouraged to vote for a permanent payroll tax cut and not a two month extension, or even a one year extension. That's really dumb.
And what will be the likely political effects of this latest Republican maneuver? The GOP's Payroll Tax Fiasco says this:
"GOP Senate leader Mitch McConnell famously said a year ago that his main task in the 112th Congress was to make sure that President Obama would not be re-elected. Given how he and House Speaker John Boehner have handled the payroll tax debate, we wonder if they might end up re-electing the President before the 2012 campaign even begins in earnest.
The GOP leaders have somehow managed the remarkable feat of being blamed for opposing a one-year extension of a tax holiday that they are surely going to pass. This is no easy double play.
Republicans have also achieved the small miracle of letting Mr. Obama position himself as an election-year tax cutter, although he's spent most of his Presidency promoting tax increases and he would hit the economy with one of the largest tax increases ever in 2013. This should be impossible.
House Republicans yesterday voted down the Senate's two-month extension of the two-percentage-point payroll tax holiday to 4.2% from 6.2%. They say the short extension makes no economic sense, but then neither does a one-year extension. No employer is going to hire a worker based on such a small and temporary decrease in employment costs, as this year's tax holiday has demonstrated. The entire exercise is political, but Republicans have thoroughly botched the politics."
And setting aside the political consequences, what will be the impact on the real economy if the payroll tax breaks are extended only through part or all of 2012? Stanford economics professor John Taylor says this about that in Want Growth? Try Stable Tax Policy:
"The two-month payroll tax cut being debated in Washington reduces to the absurd the recent revival of short-term Keynesian stimulus programs. That such a temporary cut would stimulate the recovery and get employment growing defies common sense.
There is no hard evidence that the temporary payroll tax cut of this year stimulated the economy, and another one for the first two months of next year will obviously do even less. In fact, economic growth declined after this year's temporary tax cut was implemented, so proponents need to appeal to dubious "things-would-have-been-worse" arguments.
Like the one-time rebate of 2001, the temporary tax cut of 2008, the cash-for-clunkers and stimulus payments of 2009, or similar policies tried back in the 1970s, these temporary policies consistently fail to stimulate sustainable recoveries. And as this history shows, extending the temporary reduction from two months to six months or even to 12 months would be at best a marginal improvement.
Even economists who claim that these policies stimulate—such as those at forecasting firm Macroeconomic Advisers—admit that they cost jobs as they are turned off, leaving the recovery no better off. Republican presidential candidates Michele Bachmann and Mitt Romney are right to call the payroll tax scheme, respectively, a "temporary gimmick" and "just a Band-Aid."
But the policies are worse than doing nothing at all. Rather than stimulate the economy, they hold the economy back by creating policy unpredictability and by distracting Washington from crucial long-term reforms that are key to restoring economic growth and creating jobs."
And the non-truth telling impact of all this political nonsense? That's where we the people come in.
Are we as indifferent, naive and self centered as the politicians believe? No, we're not.
Are they really as awful as they appear to be? Apparently so.
We're in charge. Let's act that way.
Thanks. Bob.
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