Nouriel Roubini supported a payroll tax holiday (September)

[ProSense]

What America needs is a payroll tax cut

By Nouriel Roubini
Friday, September 17, 2010

<...>

A much better option is for the administration to reduce the payroll tax for two years. The reduced labor costs would lead employers to hire more; for employees, the increased take-home pay would boost much-needed economic consumption and advance the still-crucial process of deleveraging households (paying down credit card debt and other legacies of the easy-credit years).

Most policy approaches, including the Obama proposals, have tended to subsidize the demand for capital rather than the demand for labor. That has the problem backward. In the second quarter, capital spending reached an annual growth rate of 25 percent. The argument that increased demand for capital leads to greater demand for labor (i.e., if you buy more machines you need workers to run them) has not held up. Firms are investing in capital goods, equipment and offshore offices that allow them to produce the same amount of goods with less -- and lower labor costs. To avoid a chronic increase in the unemployment rate, we need to subsidize the demand for labor -- achieving job creation -- rather than making it cheaper to buy capital, as investment and other tax credits would do.

President Obama could fully fund the reduction in payroll tax by allowing the Bush tax cuts for people making more than $250,000 a year to expire. Meanwhile, the Bush-era cuts affecting middle- and low-income earners -- the vast majority of Americans -- would remain in place for the time being.

<...>

Low-income workers have historically shown a much higher propensity to consume when given extra money, so the payroll tax cut should be designed to provide a larger-percentage break to those on the low end of the income scale compared with the upper middle class.

Payroll tax cuts for the majority of low- and middle-income Americans could be just the beginning. The administration could propose even deeper cuts in payroll taxes if the president could get Congress to accede to a partial expiration of the other 2001 and 2003 tax cuts. At the end of this year, marginal cuts in capital gains, dividends and estate taxes are all up for renewal. A partial expiration of those special reductions -- more likely to hit higher-income individuals -- would not have to raise rates to the levels that preceded the Bush tax cuts; it could also incentivize those companies that have built up huge cash reserves (in effect, overinvesting in capital at the expense of hiring) to increase their demand for labor.

These temporary changes could not realistically be promoted as deficit-reduction measures. But they would hold the line against additional government debt while the nation awaits the recommendations of the president's bipartisan panel on deficit reduction. Absent a new stimulus package -- which appears highly unlikely at this point -- these cuts direct billions in cash back into precisely those American households most likely to spend it and those businesses most likely to apply it to hiring. A tiny percentage of the highest-income Americans will pay more for the service the government rendered to their brokerage firms and investment banks in 2008. In exchange, a large tax break can be fashioned for employers and employees that jump-starts consumption, encourages hiring and thereby reduces the risk of a double dip without busting the budget.

more

Also, Laura Tyson on the ideal stimulus, 2008:

“For a $500 billion stimulus package, I would include the following policies:

*$40 billion for additional UI and food stamp benefits
*$175 billion of infrastructure spending, including about $90 billion for alternative energy and green initiatives
*$120 billion for grants and loans to state and local governments
*$165 for household and business tax relief (including a temporary payroll tax holiday)

<...>

[FrenchieCat]

1. He and the Congressional Black Caucus are sell outs, Doncha Know?

I read it right here at DU!

[elleng]

17. ...

:thumbsup:

:hi:

[rfranklin]

2. Better solution...raise minimum wage to $10 per hour....

The economy would turn around immediately.

[Pisces]

6. Maybe you don't know how Congress works. You must have the votes. Do you think

Republicans will vote for this??????? Some people want unicorns and rainbows with pots of gold at the end. Those two things have the same chance of happening.

[John Q. Citizen]

28. I can guareentee the votes. We offer to trade Obama for their votes. Obama

can either resign or be impeached by the Dems. with enough Repo votes to do it.

In return for achieving their number 1 goal, the Republicans will happily vote for this.

Sure Obama would have to quit being president. but think of all the good that would be achieved. And Biden is capable.


I doubt Obama would stand in the way of this since it's a compromise and it's bi-partisan and the unemployment would be extended.

[Capn Sunshine]

20. That's very true

wish we had the votes

[OHdem10]

3. Thinking globally, this puts us on par with the 3rd world as

the next step is lower and lower salaries.

When we reach the point at which 20K is the Median Income
(Median--1/2 country makes above 20K and 1/2 country makes
below it.

With these salaries it will be hard to pay Payroll or any other
tax.

[FrenchieCat]

4. That has little to do with the fact that some of our friends

are all over the internet playing the Fear Card on SS,
while working hard in scuddling this tax deal in order
to help jack up the rate of tax on 98% of Americans,
in hopes that in Obama breaking his promise to those Americans,
a Republican President and Republican house and Senate can be
elected in 2012.

[pa28]

5. He seems to be talking about a payroll tax holiday as does Reich.

The tax proposal currently under consideration deals with a FICA (SS contribution) holiday.

The payroll tax holiday is a great idea. The FICA holiday gives leverage for SS cuts in the new congress.

[FrenchieCat]

7. Please explain the difference......

Because Social security Tax and FICA are the same thing.


What does FICA mean and why are Social Security taxes called FICA contributions?

The payroll taxes collected for Social Security are of course taxes, but they can also be described as contributions to the social insurance system that is Social Security. Hence the name "Federal Insurance Contributions Act."

So FICA is nothing more than the tax provisions of the Social Security Act, as they appear in the Internal Revenue Code.
http://www.ssa.gov/mystatement/fica.htm

[pa28]

8. I think that's what I said.

FICA and federal tax withholdings are both taken from payroll. It looks like Reich and Roubini are advocating a holiday from the federal tax withholdings.

The concept of a FICA holiday is an idea that has circulated among Republicans for some time and it's the plan included in the President's budget proposal.

[ProSense]

11. No,

Reich specifically advocated replacing the lost by increasing the the threshold.

Making Work Pay was a cut in the income tax.

[Mass]

12. Reich advocates to lower the taxes on the lower part of the wages and to increase the cap to

compensate.

[FrenchieCat]

15. No....you are wrong and/or confused.

Payroll tax is payroll tax, period....

Not to be confused with Income tax, which is federal tax withholding.

[avaistheone1]

9. Nouriel Roubini Was Wrong, Again, and Again and Again...

http://www.erictyson.com/articles/20081024_1

[Mass]

10. Of course, I am sure you understand that both proposals you list are MORE progressive than the tax

deal. Or do you intend to deal with each proposition individually.

The Tyson proposal has food stamps for example, and infrastructure spending and grants for state and local government, all of which is a stimulus.

In the Roubini proposal, the payroll tax cuts is paid by getting rid of the tax cuts for millionaires. In addition, contrarily to the Obama proposal, it both affects workers and company payroll tax, so it actually lowers the cost of labor.

I am still not sure I agree with this proposal, contrarily to Reich's, but a tax incentive package is not a set of proposals that can be cut and paste from one package to an other. They are an ensemble that TOGETHER makes sense. If you pick and choose, it will not necessarily make sense.

[ProSense]

13. They are part of the deal

the OP is about the payroll tax holiday, not the overall deal. The deal is being criticized primarily for the tax cuts for the rich and the estate tax.

[Mass]

14. The payroll tax holiday is part of a package. You cant judge it individually from the rest

It makes no sense to say it is good in the Obama package because you think it is good in the Roubini package. These proposals are not the same. They dont even deal with the tax holiday the same way.

[ProSense]

16. Of course I can,

it's part of the alternate packaged proposed by the Congressional Black Caucus package too: Congressional Black Caucus opposes Obama on tax-cut package

<...>

The CBC's counter-proposal showed few signs of members giving up ground. The proposal includes a two-year extension of the Bush-era tax cuts for the middle class -- which was part of the tax-cut measure that the House passed this month -- as well as a payroll tax holiday and a 13-month extension of unemployment insurance benefits. All three components are priorities for congressional Democrats.

<...>

[Pale Blue Dot]

18. This is no surprise, since Roubini is one of those "doom and gloomers" people like to mock.

He predicted the economic crisis, he disagrees with most everything Obama has done economically, he thinks we are in way too much debt, and I'm sure he is NOT in favor of Obama's tax deal with the Republicans.

I invite EVERYONE to peruse his website to see his actual positions, beyond this one which appears to be convenient for the OP.

http://www.roubini.com/

[Pale Blue Dot]

19. In fact, here you go - he DOESN'T LIKE the Obama compromise:

Economist Nouriel Roubini on Wednesday voiced concern over a compromise on extending tax cuts struck by US President Barack Obama and Republican leaders, saying the agreement could expose the US to bond vigilantes who will drive up bond yields.

Bond vigilantes – the term was coined by economist Ed Yardeni in the 1980s to describe major investors who demand higher yields to compensate for the perceived risks resulting from large deficits - could derail the country’s precarious recovery, some economists say.

Roubini, who has been dubbed Dr Doom since he accurately forecast the latest financial crisis, said on Twitter: “Obama-GOP tax deal costs $900 billion over two years. US kicking the can further down the road. Are bond vigilantes starting to wake up?”

Republican leaders and the White House agreed earlier this week to extend tax cuts on all income groups for two years and extend unemployment benefits in a deal which they hope will spur economic growth and cut unemployment.

Roubini is not alone in thinking the deal could worsen the US deficit and put the country at risk.

http://www.cnbc.com/id/40564296

[ProSense]

21. That's a statement about

deficits and uncertainty, not about the merits of the payroll tax holiday.

Reich hates the deal too.

[Pale Blue Dot]

23. If he hates the whole deal, I'm not sure what your point is.

He may have supported a "payroll tax holiday" under specific circumstances, but this tax bill isn't it. Isn't this OP misleading if you fail to mention that Nourini thinks the deal is bad policy, even if one part of it is something he might agree with under different circumstances?

[ProSense]

25. The OP is about the payroll tax holiday

which was also proposed by the Congressional Black Caucus when they rejected the President's deal.

[Pale Blue Dot]

26. So the payroll tax holiday is currently under consideration seperately?

I wasn't aware that it was.

[ProSense]

27. No, it isn't, but

it's being criticized separately as an attempt to attack Social Security. Again, it's also included in a plan other than the President's.

[Ikonoklast]

22. So, he was for it before he was against it.

Gotcha.

[Pale Blue Dot]

24. Lol.

Do you read Nourini? His positions are entirely consistent. You're trying to compare apples to oranges.

[hay rick]

29. Meanwhile, back in the real world

From the article:
"President Obama could fully fund the reduction in payroll tax by allowing the Bush tax cuts for people making more than $250,000 a year to expire. Meanwhile, the Bush-era cuts affecting middle- and low-income earners -- the vast majority of Americans -- would remain in place for the time being."

Please notice he supports a payroll tax holiday funded "by allowing the Bush tax cuts for people making more than $250,000 a year to expire." Not a part of the proposed compromise.

He goes on to say: "Payroll tax cuts for the majority of low- and middle-income Americans could be just the beginning. The administration could propose even deeper cuts in payroll taxes if the president could get Congress to accede to a partial expiration of the other 2001 and 2003 tax cuts."

Good luck with that one. So Roubini's endorsement of a payroll tax cut is contingent on congress agreeing to allow tax cuts for those making more than $250,000 to expire. He also recommends an increase in capital gains and dividend taxes.

All in all, not a ringing endorsement of Obama's proposal.

[ProSense]

30. The article isn't about the deal it's about a payroll tax holiday

"President Obama could fully fund the reduction in payroll tax by allowing the Bush tax cuts for people making more than $250,000 a year to expire."

It's being fully funded by the general fund. Still, what difference does it make, it's still a payroll tax holiday.

Sure, the tax cuts for the rich suck, but these are Republican demands and the rest of the package is solid.

Demonizing the payroll tax holiday because the tax cuts for the rich suck makes no sense.

Here's the Congressional Black Caucus' position on the tax holiday:

The CBC's counter-proposal showed few signs of members giving up ground. The proposal includes a two-year extension of the Bush-era tax cuts for the middle class -- which was part of the tax-cut measure that the House passed this month -- as well as a payroll tax holiday and a 13-month extension of unemployment insurance benefits. All three components are priorities for congressional Democrats.

Trying to turn this into some sinister ploy is ridiculous.

[Phx_Dem]

31. It seems DUers are happy to use GOP talking points

when it suits them. There's alot of evidence showing the liberals and progressives have advocated payroll tax cuts, but now that the Weekly Standard is claiming it as a GOP idea, the progressives are so eager to agree. They're sounding more like Republican and teabaggers every day. They can't even have a civil discussion anymore.

Sad.