In my A Shame Republicans Let Politics Trump Economics, I bemoaned the terrible politics of “compromise” that led to the ill-conceived extension of the payroll tax cut.
Charles Krauthammer nailed this issue in recent commentary, which I heard on the radio (I cannot find it on Google). Here is the gist of what he said:
If this were a Republican administration, the Democrats and media would be screaming about a Republican plot to do away with social security. We should not allow the Obama administration to call this a tax cut. We should call it by its true name: The defunding of social security. What’s worse, we are defunding social security for short run political gain on both sides of the aisle. All economists know there will be no economic gain from such short term measures.
We have reached the strange point where Congressional Republicans are being congratulated for cooperating with the Obama administration for passing harmful legislation, both for the purpose of short-run political gain.
1) Krauthammer on the same issue:
ReplyDeletehttp://newsbusters.org/blogs/noel-sheppard/2012/02/18/krauthammer-schools-entire-inside-washington-panel-payroll-tax-cut-cr
[Krauthammer said it was like buying crack cocaine - "A payroll tax cut has no effect at all, it’s going to make people smile for, you know, eight or nine months"]
“This tells you how bad our politics have become. Everybody here is so delighted that we finally have a bipartisan agreement and are celebrating it over what? We have just, we have, for 16 billion-trillion dollars in debt. We just added 100 billion, on a payroll tax cut that every economist will tell you is not going to have any influence on the creation of jobs or helping our economy. It’s temporary, will have no effect. And you know how we are paying for some of the goodies in there? We are auctioning off spectrum.
Now, you ought to auction off spectrum anyway. However, the idea that you’re going to do that - this is a priceless commodity that the government is selling it off – is selling crown jewels, it’s selling the jewels to buy crack. A payroll tax cut has no effect at all, it’s going to make people smile for, you know, eight or nine months. It’ll be $100 billion, and we are selling auction to do that. That’s the state of our politics today, and we’re all happy because it was done on a bipartisan basis.”
2) Extracts from September 17, 2011 / Krauthammer : “Sure it's a Ponzi scheme, but Social Security is humane and fixable”
http://www.post-gazette.com/pg/11260/1175304-109-0.stm?cmpid=news.xml
“Proposition 1: Of course it's a Ponzi scheme.
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Proposition 2: The crucial distinction between a Ponzi scheme and Social Security is that Social Security is mandatory.
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Proposition 3: Even a mandatory Ponzi scheme like Social Security can fail if it cannot rustle up enough new entrants.
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Proposition 4: This is one Ponzi scheme that can be saved by adapting to the new demographics.
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Of course it's a Ponzi scheme. So what? It's also the most vital, humane and fixable of all social programs. The question for the candidates is: Forget Ponzi -- are you going to fix Social Security?”
Comment: A ‘Ponzi’ must fail sometime. If a ponzi is fixed, then it is not a ponzi anymore. The $100 billion reduces the likelihood of saving the ponzi. However, This mandatory Ponzi scheme is correlated with other ones. So, Krauthammer may not be fully on solid ground in his strategy for saving this mandatory Ponzi scheme. But, on cannot argue that this is “the most vital, humane and fixable of all social programs.”
Even a mandatory Ponzi scheme like Social Security can fail if it cannot rustle up enough new entrants.
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