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CNN: Payroll Tax Failure May Cause Recession

From CNN’s Money.Com:

Payroll tax deadlock could hit economy

By Chris Isidore
December 20, 2011

NEW YORK (CNNMoney) — If Congress fails to pass an extension of the payroll tax holiday, it would put a serious dent into economic growth in 2012 and could even help tip the U.S. back into a recession, according to economists.

It is truly laughable to pretend that a 2% ‘tax cut’ could tip the economy back into a recession.

But our news media will clutch at any straw to try to ram this through so that Obama and the Democrats can call themselves tax cutters for the 2012 elections.

Economists surveyed by CNNMoney on Tuesday said that gross domestic product, the broadest measure of the nation’s economic health, could be about 0.4 percentage points lower in the first quarter if Congress doesn’t extend the measure which lowered payroll taxes this past year…

By this logic, if we cut taxes by 20% (ten times this 2% cut) the GDP will increase by a whopping 4%. — Let’s do it!

Most of the economists surveyed worry that raising the tax bite on most workers by up to $2,000 will put a crimp in spending in the new year and will be a drag on the economy.

Those most worried say the biggest risk is that it would slow growth to the point where any shock, such as problems caused by the European sovereign debt crisis, could tip the economy back into recession

Notice how CNN never mentions that this is really a cut of what people will contribute towards their "insurance." (FICA is the acronym for "the Federal Insurance Contribution Act.")

CNN also never mentions how this will once again cut the funding for Social Security and Medicare by more than $120 billion dollars. Meanwhile, both Social Security and Medicare are hemorrhaging money and driving our national debt crisis.

Other economists worry that the loss of the tax break would have an impact beyond just the loss of spending that the higher taxes would cause.

"The point is that the economy looks to be getting some traction and this is the wrong time to stop pushing," said Robert Brusca of FAO Economics. "The resulting backsliding could easily cost us much, much more growth."

Yes, we can’t stop doing what has been working so well up to now!

Some of the economists point out that the payroll tax dollars aren’t all that’s at stake in the Congressional deadlock.

An extension of jobless benefits for the long-term unemployed and a change in the alternative minimum tax to lift that tax burden from many middle-income taxpayers could also be lost if the payroll tax measure doesn’t advance.

And everyone knows that unemployment benefits just grow the economy like nothing else. Just ask Nancy Pelosi.

Still some of the economists surveyed believe there will be no decline in GDP even without a payroll tax holiday extension.

"Temporary tax breaks, or tax rebates, do not help the economy," said Brian Wesbury of First Trust Advisors. "The money that is provided in the tax cut must be borrowed from somewhere else. Either way, it is not left in the private sector."

Fortunately, CNN saved this crackpot’s weird notions until the final paragraph, so no one will read them.

This article was posted by Steve on Wednesday, December 21st, 2011. Comments are currently closed.

6 Responses to “CNN: Payroll Tax Failure May Cause Recession”

  1. Petronius says:

    Whatever happened to the third rail?

    If you accept the premise of this CNN headline then perhaps you should simply abolish the FICA tax altogether, and wipe out Social Security and Medicare.

    “The money that is provided in the tax cut must be borrowed from somewhere else.” Yes, very true, but three points :

    (1) The Democrats sold Social Security and Medicare to the American people on the basis that they would be funded from their payroll tax deductions as a form of old age insurance or a self-funded investment like an annuity, and not as open-ended welfare programs supported by general receipts or taxes levied solely on “the rich.”

    (2) When money is borrowed from “somewhere else,” today that somewhere else is usually the Fed. In other words, the FICA tax holiday generates even more Fed money printing to buy more debt, which sooner or later will destroy the US dollar, asset values, savers, and retirees, while it also undermines the solvency and sustainability of Social Security and Medicare.

    (3) Meanwhile, apart from drastic and risky cuts to the defense budget, the regime is doing nothing to rein in its historic spending spree or to deal with its massive public debt and deficits that are dragging down the economy and jeopardizing America’s long-term security.

    We are witnessing fiscal and monetary abuse, manipulation, and lying by government on a scale hitherto undreamed of.

    • proreason says:

      “If you accept the premise of this CNN headline then perhaps you should simply abolish the FICA tax altogether”

      That’s the marxists plan, is it not? This whole thing is the beginning of their attack on SS and Medicare.

      They have concluded from the Tea Party movement that people 50 and older will not turn to violence. Therefore, they feel free to enforce their agenda.

  2. tranquil.night says:

    McConnell and the moderates really f-ed us on this one. Stupid Party wins again.

  3. Mithrandir says:

    Just watching CNN’s talking heads a few hours ago….

    Guess who is “ON THE HOTSEAT”?

    A) Obama, and his lack of leadership skills on display again? —No..

    B) The democrats in the Senate, who can’t even pass a budget? —No..

    C) The amazingly lazy Senate as a whole, who are obviously trying to bolt out of town for the holidays? —No..

    D) House Republicans who are making people accountable. —Of course!

  4. P. Aaron says:

    Has the country recovered from the last recession yet?

    • sticks says:

      P Aaron, probably any number of others on this site could answer your question better that I, but it seems to me (with my limited understanding) that our government artificially props up our GDP with all kinds of borrowing and spending and that the fed helps with quantitative easing (printing money). The net result is about .2% growth of GDP. If I’m not mistaken, without all this “help” GDP would be in negative numbers. Hopefully others will correct me if I’m wrong. I just read the other day that the American Real Estate Association addmitted that they have been cooking the books so to speak by claiming that sales have been much higher than they actually were since 2007 or 8, thus making the overall picture even gloomier. I wonder how it would be if we knew the whole truth about unemployment, inflation and other basic economic stats?

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