Reply #1: Again? [View All]

[ProSense]

From the link:

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In principle, this would be a reasonable form of stimulus. The distribution of the tax cut is relatively progressive....

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However, there is a serious political problem with tying the tax cut to Social Security. While the deal is that the trust fund will be unaffected by the tax cut, the question is what happens when the extension ends. Several Republicans in Congress have already publicly said that they would oppose restoring the payroll tax to its former level, since that would be a tax increase. And increasing taxes is the most deadly sin for many Republicans.

This raises the possibility that Republicans will try to keep the lower Social Security tax rate in place indefinitely....

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Baker saw a "serious political problem," a hypothetical about what the Republicans might try to do. After Bush's attempts to privatize Social Security, Ryan's plan and "Cut, Cap and Balance," it's evident Republicans will try to dismantle Social Security. They are going to try to do it any way.

While Baker is concerned about a political consequence, he admits the payroll tax cut is "stimulus," its distribution "relatively progressive," and that its benefits mostly middle-income and low-income Americans.

So while Baker is against it based on a hypothetical political risk, he emphasized then what he recently stated: The Payroll Tax Cut Did Not Cost Security Revenue

On edit, Baker: Statement on the American Jobs Act and Work Sharing

Washington, D.C.- Following the President's address to Congress and the announcement of the American Jobs Act, CEPR Co-Director Dean Baker released the following statement:

"It is encouraging to hear that President Obama included work sharing as part of his jobs agenda. This is a job creation measure that both has been shown to be successful and has the potential to break through partisan gridlock.

"The basic logic of work sharing is simple. Currently the government effectively pays for workers to be unemployed with unemployment insurance. Rather than just paying workers who have lost their job, work sharing allows workers to be partially compensated for shorter work hours. Instead of one worker getting half pay after losing her job, under work sharing five workers may get 10 percent of their pay cut after their hours are cut by 20 percent.

"This situation is likely to be better for both employees and employers. It allows workers to maintain their jobs and continue to upgrade their skills. It avoids a situation where workers may end up as long-term unemployed and find it difficult to get re-employed.

"This is also likely to be better from the standpoint of employers since it keeps trained workers on the job. When demand picks up, they don’t need to find and train new workers, they simply must increase hours for their existing work force.

"This approach has been a proven success in many countries, most importantly Germany. The unemployment rate in Germany is half of a percentage point below its pre-recession level even though its growth has been no better than in the United States. If a work sharing program here in the United States can reduce dismissals and layoffs by just 10 percent, it would generate the equivalent of 2.4 million new jobs a year.

"As a new approach, this plan may also get around Republican opposition. Work sharing has drawn support across the political spectrum. AEI economist Kevin Hassett, who was Senator McCain’s chief economist in his 2000 campaign, has been a vocal proponent of work sharing. The policy in Germany is fervently embraced by Germany’s conservative government.

"It is encouraging that President Obama was willing to step outside the box and try a new approach. If the Republicans cooperate, this policy could make a big difference to millions of workers and their families."