Originally Posted by Mulligan
I don't understand this, Sam, so maybe you are someone else can clarify for me. Why has there been so much noise over these impending cuts, when hardly a word was mentioned over the 2% payroll tax, before it was reinstated. Seems like the payroll tax increase would create more headwind for the economy than these cuts will.
Just to say it: if/when sequestration occurs the government will still spend more dollars in 2013 than it did in 2012 (though after inflation is calculated in, there will be a tiny reduction).
I think many in DC see a lot more political mileage in the sequester issue (by pinning it on one side or the other, by publicly wringing hands over the impact of these reductions, etc) than in the resumption of the historic SS payroll tax.
The resumption of the payroll tax takes $125 billion out of the economy for 2013, the sequester takes less than $85 billion out of the economy, so for this reason alone the SS tax is probably a bigger "hit" to the economy. I'm reluctant to believe it, but maybe
making political hay out of the SS tax resumption is even too cynical for the crowd in DC. After all, the SS program is in the red and needs the money, both sides agreed to the one-year reduction, and there has been a multi-decade track record of what the tax has historically been and this was a one year reduction (so it's hard to call it a tax increase).
Anyway, that's my take on it.