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Tuesday, December 20, 2011

The Payroll Tax-Cut Consensus: Another Keynesian Sand Castle

Democrats are pushing hard for an extension of the payroll tax cut, without which, they claim, the economic recovery will falter. They salivate over the hard-hitting campaign ads to come: “Republicans favor tax cuts, but only for millionaires. Republicans sabotage the economy and the middle class to beat Obama.”

The Democrats and their media enablers use their standard refrain to make the case: All reasonable economists believe in the “Keynesian consensus” that tax cuts increase consumer spending and promote economic recovery. How can anyone argue against such “settled science”? We do not have a Ronald Reagan around to remind us: “There they go again.”

Intimidated Republicans do not engage in rebuttal. I guess they fear that voters cannot understand why extending the payroll tax cut is both bad economics and bad politics.

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