As Congress returns to Washington after the holiday break its members must pick up where they left off by extending the Social Security tax cut and providing unemployment payments to the long-term unemployed for the final nine months remaining in 2012.
Those recession-fighting benefits that go almost entirely to the 99 percent have a price tag of $160 billion, give or take a billion. Economists worry that letting the cuts expire might shove the country back into recession. But nobody, from the Obama administration on down, has come up with a way to pay for the perks within a reasonable period of time.
Many of the ideas proposed would be permanent changes that would cut spending or raise revenues in relatively small amounts, such as preventing state and local government workers from improperly claiming Social Security benefits or repealing a tax break taken by businesses that buy corporate jets.
Eliminating Saturday delivery of mail and other postal service reforms, for instance, would only pay for two months of the temporary tax cuts but would last forever.
Speaking about an administration proposal to increase security fees for non-stop flights, which would bring in relatively little, a government economist said, “This is definitely a situation in which there’s a lot of pain for not much gain and that trying to do a lot of these things absent a big, broader budget deal is going to be difficult to do.”
DIFFICULT AND NOT smart. Rather than a permanent nickel-and-dime patchwork of tax and tax-break changes that add up to the $160 billion needed, Congress should pay for the temporary stimulus the payroll tax cuts provide quickly, with substantial, but temporary, levies.
In World War II Congress inaugurated luxury taxes to raise money for the war.
A similar tactic would make sense today. As has been pointed out over and over again for the past three years, the impact of the Great Recession has been grossly unequal. While the poor became desperately poor, the rich grew richer. The way to pay for the payroll tax cuts is to impose a year-long “Equalization Tax” on the very rich. Not to punish them, but to make it unnecessary to raise a batch of taxes permanently on the nation as a whole.
Willie Sutton, a notorious bank robber in the 1920s and ’30s, was asked why he only robbed banks. “Because,” he said, “that’s where the money is.”
Sutton’s logic applies to the dilemma Congress faces. It should tap the rich for this $160 billion because they have it, won’t miss it and bear enough responsibility for the economic collapse to make Congress feel virtuous for sending the bill to them.
— Emerson Lynn, jr.
