.PNG)
Payroll tax holiday under discussion
Posted by WARREN MOSLER on January 14th, 2009
Obama, Democrats Reshape Tax Relief Measures in Stimulus Package
by Katherine Skiba
Jan 13 (US News) — Senate Minority Leader Mitch McConnell of Kentucky said an idea that emerged during the GOP senators’ lunch today was a two-year suspension of the payroll tax. “It would put a lot of money back in the hands of businesses and in the hands of individuals,” McConnell said. “Republicans, generally speaking, from Maine to Mississippi, like tax relief.”
[top]
January 14th, 2009 at 12:51 pm
Great! What is the tax on nothing? Not from not = NOT!
Reply
January 17th, 2009 at 12:29 pm
Hi Warren….my understanding of your “process†is as follows:
Fiscal policy: main driver for economic growth. Private Surplus = Gov’t Defecit.
Monetary policy/interest rate policy: ineffective for promoting economic growth; serves technical needs
Tax Policy: taxes-justification for currency; to be used in conjunction with fiscal policy to manage growth/deflation/inflation
Issuance of Treasury Debt: Eliminate; serves “no†purpose; Investors wishing to defease liabilities against riskless asset can engage in, say, “swaps†with FED to highlight investor choice rather than Government need. How to determine interest rates for swap [or anything else] if no government debt trades? [would Gov’t just “set†a rate ?]
Situation: Set fed funds rates to “Zeroâ€ÂÂ…..In times requiring increased demand, increase fiscal stimulus in conjunction with lowering taxes/rates. In times requiring moderation of demand, reduce fiscal stimulus, increase taxes/rates. Inflation is barometer [as defined by?].
Reply
January 17th, 2009 at 4:11 pm
George -
Warrne can answer for himself, of course, but I think you missed the most crucial part: the ELR. Instead of trying to “fine tune” fiscal policy, which will always operate with a lag and inevitably be politicized, you want to et up automatica stabilizers that will set the deficit to the correct level more or less on their own. Setting the price for unskilled labor allows the deficit to “float” and tends to stabilize prices.
Reply
January 17th, 2009 at 10:51 pm
Good discussion- both correct!
ELR funding uses and employed buffer stock rather than an unemployed buffer stock for price stability in a ‘market’ economy.
And even with ELR if the ELR pool is deemed too large or too small a fiscal adjustment is in order.
Or if it is deemed the balance between public and private goods be changed that too is done via fiscal adjustments
Reply
January 18th, 2009 at 1:11 pm
Thanks guys…got it…makes sense…..The ELR is Fundamental to process….rather than guessing what that deficit should be, the ELR establishes that for you….and the changing price paid to the unskilled makes that deficit dynamic and stabilizes the price level in the economy. However, there is still a role for fiscal adjustments based on “top-down” desirability….
Reply
January 19th, 2009 at 10:03 pm
yes, as well as introducing benefits from the bottom up. for example, add child care to the elr as a benefit and market forces will drive most other businesses to do same.
Reply
January 20th, 2009 at 9:38 pm
I’m sorry… ELR is???
Reply
January 20th, 2009 at 9:43 pm
‘employer of last resort’
Reply