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The payroll tax holiday expiration is going to raise more revenue than the tax increases on the wealthy over the 10 year period. The WH is touting the $617 billion from higher taxes on the wealthy, but the 2% FICA holiday expiration is going to bring in over a trillion over the same period.
FICA is a regressive flat tax, beginning on the first dollar earned up to the first $113,700 in paycheck incomes for FY 2013, and there are no deductions. While nominally split b/n employer and employee, the effects of the higher costs of employment are 'passed thru' to employees, who end up bearing the brunt of the employer side of the tax, in the form of lower wages, employer incentives to automate, etc.
FDR said himself that payroll taxes did not make economic sense. They are there for political reasons, not funding. FDR called them a "useful fiction." They give SSI recipients a moral, political, and statutory legal claim to SSI benefits; which helps shield SSI from politicians who would cut SSI spending. As one can imagine, payroll taxes help mute/quiet conservative criticism of SSI as providing a "free lunch" to retirees, even though that line of argument is not exactly silenced by FICA.
No reason besides the politics that SSI can't become a Social Insurance benefit for working in this great country of ours; and if a politician wants to try to throw grandma out on her ass, let them try, and let the American people defend grandma at the ballot box. If Republicans want to run as pure sadists, let them; it'll be good for Democrats twice over: once for cutting FICA taxes on working people, and twice for defending grandma. So I say, bring it on!
But back to our current situation. With payroll taxes going back up, and income taxes going up for the few with the least propensity to spend, we're looking at a situation where revenues are going to rise faster than the jobs are going to be created. While I'm bullish (with government spending qualifiers) for the next year or so, before we get anywhere close to Clinton era employment levels, the government's budget is going to stall the recovery; and that's without the sequestration cuts in March happening.
What sustained Clinton era employment levels was a massive credit expansion enabled and fueled in part by the creative destruction and creative addition of jobs through technological gains, and a lot of fraud. The Clinton era tax increases and spending cuts, which produced a SSI supported government surplus against the private credit expansion, caused a recession in 2000 that erased the government surplus before 9/11 under GWB, as lending retracted in the wake of heavy losses and reduced net-US dollar assets.
Basically, the same thing happened in 2008 just on a much wider scale. The government deficit was mowed down to 1.7% of GDP in 2007, largely due to the fact that 1/3 to 2/5 of American home loans issued in 2006 were what the industry itself termed behind closed doors to be "liar's loans" (William K. Black). FICA nearly surpased income taxes as the single largest source of tax revenue! The FED moved interest rates up and all those adjustable rates went up, and all the liar's loans started defaulting. Everybody got screwed. Huge savings demands went unsupported by offsetting spending, and that output didn't get sold, and millions of people all over the globe went out of work. And the loss in tax revenue and automatic stablizer spending bled government deficits to produce the net-US dollar financial assets desired by the non-government.
Modern Monetary Theory's (MMT) prescription for our sluggish growth is a FULL FICA PAYROLL TAX SUSPENSION, and the way forward for price stability is a JOB GUARANTEE (JG) for everyone able and willing to work, but unable to find gainful wage employment otherwise. Demand for JG employment would then determine the size of the countercyclical budget of the goverment. We should raise SSI benefits. We should provide per capita funding to states to help them get over the hump. Above all, we must invest in our children. We must invest in education: it's the only capital that will remain from our generation 50 years out.
MMT is decidely academic. It is not itself a political movement. It is training a better one to come.