Wednesday, June 22, 2011

Payroll Taxes as Stimulus: Speaker Boehner Versus Professor Feldstein

Republicans oppose extending the payroll tax break. John Boehner calls this tax break a “gimmick”. Republican economist Martin Feldstein disagrees.

7 comments:

Ken Houghton said...

Given the choice between Boehner playing politics and Feldstein's free finesse, I'll take Boehner for $600, PGL.

Sorry, but Feldstein also declares that extending the Bush tax cuts "would probably have pushed the US economy into a new recession." Which will be his excuse at the end of next year as well.

Meanwhile, calling a transfer-debit that really should be an example of Ricardian Equivalence (if there is such a thing) a "gimmick" is rather accurate.

Cutting payroll taxes doesn't increase AD in an environment where workers are credit/liquidity-constrained. And it certainly doesn't cause new hiring in itself. At best, one day a month, the Hamburger Helper/Dog Food choice goes for the HH.

TheTrucker said...

Ken Houghton: I think you meant to say that Feldstein thought that ending the tax cuts would produce a recession. Am I wrong???

ProGrowthLiberal said...

"Cutting payroll taxes doesn't increase AD in an environment where workers are credit/liquidity-constrained." Actually it does. Ricardian Equivalence assumes that households are NOT facing borrowing constraints.

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