Cutting Payroll Taxes
President Trump has announced that he is going to pursue a
stimulus to our economy in order to cope with its present decline resulting
from the Corona Virus and the oil war between Russia and Saudi Arabia. As part
of his stimulus, he proposes a cut in payroll taxes—an extremely shortsighted
and unwise decision, to say the least. Just listening to this recalls to my
mind the words of the great French economist, Frederic Bastiat (1801-1850) in
his discussion of “That Which is Seen, and That Which is Not Seen”:
“In the
department of economy, an act, a habit, an institution, a law, gives birth not
only to an effect, but to a series of effects. Of these effects, the first only
is immediate: it manifests itself simultaneously with its cause — it is seen.
The others unfold in succession — they are not seen: it is well for us, if they
are foreseen. Between a good and a bad economist this constitutes the whole
difference — the one takes account of the visible effect; the other takes
account both of the effects which are seen, and also of those which it is
necessary to foresee. Now this difference is enormous, for it almost always
happens that when the immediate consequence is favourable, the ultimate
consequences are fatal, and the converse. Hence it follows that the bad
economist pursues a small present good, which will be followed by a great evil
to come, while the true economist pursues a great good to come, — at the risk
of a small present evil.”
Reducing payroll taxes to stimulate the economy is easy. It
is popular and readily acceptable to those on the receiving end; but, from
whence does the money come to pay our Social Security and Medicare? Does it
come out of the air? I don’t think so, and I suspect neither do you. How about
when the time comes to reinstate these tax cuts? How popular and readily
acceptable will that be then? How much harder will it be for our
Representatives and Senators in the Congress to sell to the people?
Let us pursue this a little further. It is common knowledge that
present payments into the fund are insufficient, and tax collections must be
increased in order for the fund to remain solvent. How acceptable will that be?
Now, when you add this increase to the reinstatement above, how much more
difficult will that be to achieve? Are we just going to let our Social Security
fund go broke?
But we are not only talking about Social Security. Also
included in those payroll deductions are payments for Medicare. Although not
frequently discussed, it too is common knowledge, i.e. everybody knows it or
should, that Medicare is insufficiently funded. In fact, it is a major
contributor to our annual government deficit and, therefore, national debt.
If our long range intent is to keep and improve these
benefits for the good of our people, it would seem to me that cutting these
payroll deductions to stimulate an already over-stimulated economy (One should
note that the preponderance of spending by our country and our people is
supported by borrowing, i.e. national debt, credit cards, mortgages, student
loans, auto financing, payday loans at 100% interest plus, etc.) is, to say the
least, very unwise and short-sighted.
On the other hand, if our plan is to eliminate Social
Security and Medicare, this is the way to go. It’s a sure winner.
Hmm… This brings to mind the sayings of Forrest Gump. “You
never know what you’re going to get when you open a box of chocolates” I think
he also said, “Stupid is as stupid does”.
Also, I am compelled to quote the famous words of William
Shakespeare in his play Julius Caesar, when Caesar is warned by the soothsayer
to “beware the Ides of March”.
Respectfully,
Ronald Miller
