December 10, 2010
READING ROOM FOR FRIDAY: 12.10.2010
►Obama 'Confident' Congress Will Pass Tax Deal
Scott Horsley/NPR/Dec 10
In the face of strong opposition from members of his own party, President Obama says that he's confident lawmakers will eventually approve a tax cut deal he negotiated with congressional Republicans.
►Liberal Democrats: We won't support tax deal without changes
Todd Spangler and staff/Detriot Free Press/Dec 10
Liberal Democrats in the U.S. House delivered a sharp rebuke to the deal between President Barack Obama and Senate Republicans to extend unemployment benefits and keep tax rates stable, saying Thursday that they wouldn't accept the agreement without change.
►Angry House Democrats vow to block tax package
Lori Montgomery and Paul Kane/Washington Post/Dec 10
As the Senate steamed toward a Monday afternoon vote on the far-reaching package, House Democrats were in open revolt. Amid chants of "Just say no," they agreed overwhelmingly during a private meeting Thursday to block the measure from going to the House floor, a symbolic move that underscored the depth of their anger...
"House Democrats share the president's commitment to providing the middle class with a tax cut to grow the economy and create jobs" but "reject the Senate Republican tax provisions as currently written," House Speaker Nancy Pelosi (D-Calif.) said in a statement. "We will continue discussions with the president and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote."
►Anger at tax cut proposal: strange political bedfellows
Jessica Yellin and Kevin Bohn/CNN Political Ticker/Dec 9
It is strange political bedfellows. Some on the right are joining their usual adversaries on the left in their anger at the proposed tax cut deal.
Of course, the reasons for their dismay are different. While liberals wail at the extension of the Bush-era tax cuts for those making more than $250,000 per year and other items, many are particularly upset that the measure would add hundreds of billions of dollars to the deficit.
►Senate to Consider Tax-Cut Bill That Would Add $857 Billion to U.S. Debt
Ryan J. Donmoyer and Richard Rubin/Bloomberg/Dec 10
Senate leaders released an agreement crafted by the White House and Republicans to sustain Bush-era tax rates through 2012, set the estate tax at the lowest rate in 80 years, extend jobless aid and cut payroll taxes by 2 percentage points.
The legislation would add $857 billion to the federal debt over 10 years, government analysts said.
Senate Majority Leader Harry Reid introduced the legislation late yesterday after three days of lobbying by Democrats to include measures excluded from the framework announced Dec. 6 by President Barack Obama.
►The Payroll Tax Cut: Effective Stimulus, Phony Accounting
Charles Blahous/e21/Dec 8
It’s good news that President Obama and Congressional leaders have reached agreement on a deal to prevent a near-term tax increase on individuals and small businesses. As a public trustee for the Social Security Trust Funds I feel, however, obliged to sound an alarm about one component of the deal: specifically, a double-dose of new government debt, via a proposed accounting maneuver to disguise the effects of the agreement’s payroll tax cut provision...
Understand, my point here is not to critique the idea of payroll tax relief itself. Economists on both sides of the aisle believe that payroll taxes are a drag on job creation; indeed, one reason that we need Social Security reform is to prevent future payroll tax increases from hindering economic growth. Relative to other forms of stimulus, payroll tax relief introduces a minimum of both bureaucracy and economic distortions.
The problem is not with the tax relief but with an accompanying accounting gimmick: as described, the provision would also issue $120 billion in additional debt (from general revenues) to the Social Security Trust Fund – in other words, changing the government’s accounting to make it appear as though the $120 billion had been collected even though it hadn’t.
This is more than a harmless accounting entry; because Social Security spending is statutorily limited to the amount of assets in the Trust Fund, the accounting maneuver increases the government’s spending authority by $120 billion plus interest to be accumulated over decades to come...
Let’s make this simple: Social Security benefits are funded by payroll taxes. If we want higher Social Security benefits, then we need to collect more payroll taxes. If we want to relieve payroll taxes, then we can finance less in Social Security benefits. Either policy is a valid choice. What is not valid is to refund the payroll tax while still pretending that we are successfully financing higher future Social Security benefits with money we haven’t collected.
Posted by jp at December 10, 2010 5:50 AM