Low-level stimulus

You want some serious stimulation of the economy? Three words, says Chris Lawrence: “payroll tax holiday.” To wit:

Pour $800 billion into a payroll tax holiday (probably the fastest way to inject money into the economy — it could be implemented and have money in peoples’ pockets by April 1st if passed today) of some form and there are basically four outcomes I can see:

1. People spend the money. This stimulates the economy.
2. People save the money. This provides more money for banks to loan to stimulate the economy.
3. People pay off debt. The banks become better capitalized and less likely to go belly-up at taxpayer expense. This also provides more money for banks to loan to stimulate the economy.
4. People remit the money to relatives overseas. This improves our balance-of-payments and increases demand for stuff we export to those countries.

There are several reasons why this won’t happen, but you can probably guess the one that matters:

Then again, politicians can’t easily take credit for any of those outcomes, hence why it’s more fun to spend the money on things that we’d spend money on anyway at a later date.

Which is a shame, since I would love to hear someone try to say with a straight face that diverting even a mere fistful of dollars away from the sacred Social Security Trust Fund means your Aunt Tillie is going to have to downgrade from Fancy Feast to some indifferent store brand.





Comments are closed.