Will Tax Cuts Spur the Economy?
By now you've heard about the plan to cut the payroll tax on employees that funds Social Security and Medicare by 2%. Once again the fiscal irresponsibility of those in Congress and President Obama shines through any effort to get control of federal spending and reduce the national debt. The plan is put forward at a time when many have warned about the potential bankruptcy of social security in the not too distant future. How can our "leaders" possibly defend the proposal?
The explanation seems to be that the 2% extra in workers' paycheck each pay period will stimulate the economy. We've been down this road before with little positive effect on spending. In past economic stimulus plans the workers largely saved the money or paid off bills. What makes the government think the result will be any different this time around?
Let's do some math. If you earn $500 a week, your annual salary would be $26,000. Two percent of that is $520. On a weekly basis that means your paycheck is greater by $10. You mean to tell me the workers will spend those $10? It's barely noticeable in paychecks of those who, presumably, are the targeted main recipients of the "windfall." Isn't the idea to help lower income workers?
I have a suggestion for those in Congress and the President. They should send a gift card for $520 (or 2% of whatever income you make) to every citizen who pays into Social Security. The gift card could only be used to purchase items from retailers. Hopefully, the recipients will buy high-ticket items such as televisions, stereo systems, computer products and other electronics. You use it or lose it. This is true economic stimulation. The increased sales could lead to hiring more workers and the result would be a faster growing (rebounding) economy. What do you think?