Some economists are attempting to understand the sourcing rationale behind the payroll tax cut of 2%, thinking the whole concept is rather dubious–as do I. The difference between us, though, consists of my knowledge all good politicians run from blame, and both Sides wanted to avoid the serious impact of the Inflation rate which all of U.S. officialdom proclaimed was not there. Word to the Poor Critters: Grocery-shopping housewives have already noticed the Inflation, and are starting to burn with righteous anger, which can only grow when their husbands recognize that the 2% reduction in payroll taxes did not lessen the impact of the household bills.
The Budget Deal reinforced an economic policy of doing nothing, which a vast number of people cannot afford. We live in a La-La Land, where a Tax Cut means continuing the same rate as before, this purportedly some form of stimulus; funding for Tax Cuts comes not from Spending Cuts, but from reduced revenues to programs which are currently fully-funded though not through a revenue cut; all Tax Cuts placed where economic conditions will maximize the revenue loss (can you notice all Tax Cuts are going to Those who still have an Income of major size to tax); and Government officials who think they should get Raises because they thought of a federal freeze of Civil Service salaries. No one supports any measure of Tax reform, and WE are $283bn over Budget in the first One-Sixth of the fiscal year.
Everyone in the business community knows that continuation of the Bush Tax Cuts will not entice any further investment in Production, as long as Consumer Demand is absent–which it has been for two years. Business wants only to maintain their Profitability at reduced Production levels while waiting for the Consumer to come back; something which will not happen in the force necessary without aid from the Government; again something from which federal policy avoids because of the potential to force Tax hikes as all the fallacies are realized. The interesting thing is that Tax hikes are the real force necessary to force Business to produce more, and dump the excess at Sale Cost; Consumers regaining their participation rates by Business leaders desiring the same Profits range lost to Tax hikes. A World of Smoke and Mirrors, but one where We have lost ourselves. lgl