Six weeks of stock market losses, poor jobs data, high prices in food and energy have the Obama administration casting about for policy methods by which they can get the economy going again.
As I predicted, on June 2nd in Obama's Nuclear Option on Economy, they’ve become so desperate that they are even considering tax cuts on evil corporations.
Since previous methods to gin up the economy are off the table, such as more stimulus spending and another round of monetary easing by the Federal Reserve Bank, the administration has nowhere else to go but cutting taxes.
After axing his top economic advisor last week, word from the White House is that Obama is considering a method of stimulus that would have been an anathema two years ago, but has been long favored by conservatives: cutting corporate payroll taxes.
The advantage in cutting employer-side corporate payroll taxes is that it stops penalizing employers for adding workers, while freeing up money that already resides in the payroll line item on a company’s P&L.
In fact conservatives made a strong case for a payroll tax holiday for both employers and employees in 2009 in lieu of stimulus spending controlled by the government.
"I'd have a payroll tax holiday for a year or two that would put taxes in the hands of everybody who has a job, whether they pay income taxes or not," Senate Minority Leader Mitch McConnell told Fox News in January of 2009 . "And, of course, businesses pay the payroll tax too, so it would be both a business tax cut and individual tax cut immediately."
But Obama’s political allies on the left quickly shot down the notion:
“A payroll tax holiday does not score well on this front — too little of the benefit goes to lower-income households struggling to make ends meet,” wrote the left-wing Center on Budget and Policy Priorities, playing the rich versus poor game, “and too much goes to higher-income taxpayers, who are likely to save a significant fraction of any new resources they receive.”
Instead, Congress voted for an $800 billion targeted stimulus plan that went into the kind of government programs that put our economy in the hotseat to begin with.