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Payroll Tax Holidays and MMT: It's a funny world: News recap on the Eve of Xmas

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December 21, 2011 – Comments (12)

Good article, there is a lot in here to agree with, although I am sure many won't.

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PAYROLL TAX HOLIDAYS AND MMT: IT’S A FUNNY WORLD: NEWS RECAP ON THE EVE OF XMAS
Author: L. Randall Wray  ·  December 21st, 2011 

http://www.economonitor.com/lrwray/2011/12/21/payroll-tax-holidays-and-mmt-it%E2%80%99s-a-funny-world-news-recap-on-the-eve-of-xmas/

[excerpt]

As Mae Moore says, “It’s a Funny World” (2002). Let’s try to make sense of two news reports. Help me if you can.

1. Republicans reject the payroll tax holiday because it does not go far enough. To complicate matters, the Senate has already gone on its Xmas holiday and is refusing to come back. That leaves the Republicans in a bit of a pickle—they are going to raise taxes on the average American by $1000 per year because they refuse to support a 2 month holiday extension.

 Right. Congress wants its long holiday from work, but does not want to give Americans a holiday from paying a regressive tax—the payroll tax—that for the bottom 70% of American workers takes away more income than the Federal Income tax. It is a job killer, too—as it raises the cost of employing Americans over the cost of employing workers just about anywhere on earth (few other countries tax work and employment the way we do—our payroll tax makes American workers more than 12% more expensive). So Republicans want to take away the payroll tax holiday and kill jobs.

That is a rather nice election strategy. And it is bad enough that they’re mainly running clowns for President. With the exception of Ron Paul, is there any serious candidate in the running? No, I didn’t think so. What, they actually WANT President Obama for 4 more years? Why? To continue to bail-out Wall Street? To continue to look the other way while banksters trash the economy?

Apparently the Republicans are hold-outs because they want two noxious additions to the payroll tax holiday legislation. First, they want an environment-killing Keystone pipeline—so they want that linked to the extension of the payroll tax holiday. The wording they prefer forces the President to forego any reasoned analysis of the wisdom of the pipeline by rushing a decision within 60 days. Second, they want to end the extended unemployment compensation benefits—to kill any jobs that the payroll tax holiday created. Right. We’ve been too kind to the environment and to the workers who lost their jobs because of Wall Street’s excesses, so let’s take away the payroll tax holiday and kill as many jobs as we can.

... continued

12 Comments – Post Your Own

#1) On December 21, 2011 at 10:58 AM, outoffocus (22.91) wrote:

That is a rather nice election strategy. And it is bad enough that they’re mainly running clowns for President. With the exception of Ron Paul, is there any serious candidate in the running? No, I didn’t think so. What, they actually WANT President Obama for 4 more years? Why? To continue to bail-out Wall Street? To continue to look the other way while banksters trash the economy?

 

That is this election in a nutshell (pun not intended)...

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#2) On December 21, 2011 at 11:07 AM, kdakota630 (29.62) wrote:

binve, don't mean to change the subject or hijack your blog, but I thought this was one of the coolest things I've ever seen and thought you might enjoy.

(I wanted to give credit to the blogger who originally posted the link.)

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#3) On December 21, 2011 at 11:11 AM, outoffocus (22.91) wrote:

I see what he is saying about adding jobs for the unemployed.  But as a CPA and a small business owner, a big problem with employment in this country was already mentioned earlier in the article,  its just too costly and too much of a hassle.  Its ok to want to just "create jobs" under the MMT.  However I still believe that the best way to recover this economy is to let small businesses create jobs, not the government.  The need for work is already out there. We just need to make it more accessible.

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#4) On December 21, 2011 at 11:27 AM, binve (< 20) wrote:

kdakota630 ,

I know man, isn't that the coolest! I have been watching 3-D printing technology for years (about 10 years ago, we got a demonstration from one of the local machine shops we work with with 3-D printing for rapid prototyping). But now there is not only rapid part building but they also have desireable material properties (high strength and high modulus of elasticity).

This really is Star Trek-ish technology, and it is very cool :) Thanks!

outoffocus ,

I hear you, and the snippet in this article does not convey his full thoughts on the matter. Please see this post: http://caps.fool.com/Blogs/thoughts-on-a-job-guarantee/605084 and watch the whole video. The jist being that localities know where they can usefully employ people (small businesses, local governments, municipalities, conservation initiatives, charities, etc.). So this is not a government job per se, but a goverment-funded job. It is a slightly different paradigm, but I think is a very useful distinction. But like I said, he discussed this in much more detail in the video..

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#5) On December 21, 2011 at 11:34 AM, kdakota630 (29.62) wrote:

binve

You've been following that technology for years? I hadn't even heard of it until that video.

And since you mention it being Star Trek-ish, it makes me think that if an item was scanned in one place and the information sent to a printer elsewhere, it would be getting fairly close to being a transporter.  If they're doing this now, imagine where the technology will be in another 10-20 years.

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#6) On December 21, 2011 at 11:46 AM, binve (< 20) wrote:

kdakota630 ,

Yep. The basic technology has been around for awhile now, but the recent advancements that make it a truly powerful technology are a) advanced binders and resins that are beginning to approach material properties of advanced engineering materials, and b) scanning technology. In the past you would have to tell the machine to to build the part layer by layer (the program is a lot like a CNC program), but now you can take a stereo-optical 3-D image and the printer builds its own program on the fly. Which significantly cuts down the NRE when copying a part.

it makes me think that if an item was scanned in one place and the information sent to a printer elsewhere, it would be getting fairly close to being a transporter.

That same thought had occurred to me :).

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#7) On December 21, 2011 at 12:20 PM, outoffocus (22.91) wrote:

Binve,

I read your blog on the subject of guaranteed jobs and TBQH I dont think specific government "funding" is necessary. I think if they had government funding it will be abused just like every other government program.  I think the best way to go about it is to relax alot of the honerous regulations and taxes levied on small businesses that may want to hire people but do not want to go through all the hassle.  The payroll tax holiday is a step in the right direction.  But why not get rid of the payroll taxes all together on the Federal, state, and local level. 

Right now most small businesses are trying to subvert the payroll taxes buy hiring people either "under the table" or as independent contractors.  But that just leaves either small businesses unable to deduct their wage expenses or individuals filing business returns when the shouldnt be.  Not to mention the IRS is cracking down on small businesses who are doing this.  So getting rid of those requirements in the first place would eleviate the whole issue. 

The government could fund the FICA and FUTAs on the employee's behalf or the government could refund the FICA and FUTAs to the businesses when they file their returns.   That would be a sort of backdoor job stimulus for potential employers.  

Bureaucrats fail to realize the impact of their honerous regulations.  There is NO REASON for the tax code to be as complicated as it is.  Then they wonder why people dont comply.  It has nothing to do with the price of taxes, ITS THE PROCESS. People just want to run their businesses and make money.  Not swimming in tax and regulatory paperwork.   Nor do they want to have to pay lawyers and accountants ridiculous sums of money just to sort through it. 

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#8) On December 21, 2011 at 1:06 PM, binve (< 20) wrote:

outoffocus ,

I think if they had government funding it will be abused just like every other government program.

Fair enough. I think the idea has merit, especially when viewed in a macro context, and I think the benefits would far outweigh the abuses. But I respect that you have a different opinion.

I think the best way to go about it is to relax alot of the honerous regulations and taxes levied on small businesses that may want to hire people but do not want to go through all the hassle.  The payroll tax holiday is a step in the right direction.  But why not get rid of the payroll taxes all together on the Federal, state, and local level.

I 100% agree. The Payroll tax is regressive and a huge obstacle to employment right now. We could put it on 'permanent' holiday.

Bureaucrats fail to realize the impact of their honerous regulations.  There is NO REASON for the tax code to be as complicated as it is.  Then they wonder why people dont comply.  It has nothing to do with the price of taxes, ITS THE PROCESS. People just want to run their businesses and make money.  Not swimming in tax and regulatory paperwork.   Nor do they want to have to pay lawyers and accountants ridiculous sums of money just to sort through it. 

I think that is another phenomenally good idea, and something we have talked about before. Simplifying the tax code would be a great way to remove barriers for small businesses. They could focus on their businesses instead of overly-complicated paperwork. And this dis-incentive to starting a new business would be removed. I completely agree.

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#9) On December 21, 2011 at 3:18 PM, eldemonio (98.85) wrote:

MMT's greatest fault lies in the fact that it would still rely on clueless jackasses to implement it's policies correctly and without corruption.   

On a different note, my vanilla porter turned out beertastic!

 

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#10) On December 21, 2011 at 3:30 PM, binve (< 20) wrote:

eldemonio,

Hey man!

MMT's greatest fault lies in the fact that it would still rely on clueless jackasses to implement it's policies correctly and without corruption.

I hear that criticism, but I don't agree with it. Like I said at the very  end of this post: http://caps.fool.com/Blogs/why-deficit-spending-and/621467:

7. The Ineffectiveness of using/changing the Monetary System as a Guard against Bad Policy Decisions / Politicians

Bad policies under a convertible currency standard will produce bad results. Just like bad policies under a fiat currency floating exchange rate standard will produce bad results. There is nothing intrinsic about either system that precludes the possibility of wasted output, unemployment, economic malaise, etc.

The problem right now is that so many are using convertible currency economic models to draw conclusions / make policy recommendations for what to do in our fiat currency system. It is comparing apples and oranges, and is bad macroeconomics. We need to first understand how our system actually operates and to dispel inapplicable causes/effects that would occur under a different monetary system.

MMT is not a panacea (simply understanding it won’t prevent one from making bad decisions based on good information), but understanding it will prevent policy makers from making basic *mistakes* (making bad decisions based on bad information).

A corrupt state will attempt to prop itself up regardless of the monetary system. MMT is useful in that if understood and used correctly could smooth out pro-cyclical tendencies of the business cycle, by understanding how money enters into our system. But it requires understanding and *discipline* to not turn that spending into the propping up on non-productive sectors.

Unfortunately the 'lack of discipline' aspect is the problem with government. It was a problem under the Gold Standard (which caused the issuance of bonds in the first place as well as implementation of the Federal Reserve). It is a problem under our current monetary system with the propping up of Financials.

There is no guard against bad policy. And if we think we can change the monetary system to prevent bad policy decisions from happening (which we can't) then we need new politicians. Its as simple as that..

On a different note, my vanilla porter turned out beertastic!

Awesome!

I also did a little more Stone Beer hunting / requesting from my supplier. They started carrying a larger variety of 22s. So I got to try the 11.11.11 vertical Epic. Like with the Cali-Belganique IPA, I thought it was very interesting and glad I tried it, but not my favorite. But I think it was very appropriate for the season. The Belgian ale yeast made a nice twist on this heavy beer and the cinnamon and chiles made for some nice warmth, what you would look for in a Christmas-type ale.

I also have a 22 of DOUBLE-bastard sitting in my fridge. I am saving that one for Christmas day :) .

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#11) On December 21, 2011 at 4:16 PM, eldemonio (98.85) wrote:

I agree.  I wasn't trying to poke holes in MMT, just wanted to point out that it doesn't really matter what monetary system is in place if the people in control are corrupt aholes.  They'll manipulate any system to their benefit. 

The 11.11.11 is alright, not their best.  I would like put together their full vertical series for a tasting on 12.12.12.  I'd need to save them instead of drinking them, that may be a problem. 

Double Bastard is a great beer - enjoy.

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#12) On December 21, 2011 at 11:48 PM, awallejr (83.78) wrote:

I swear the inmates really are running the asylum now.  I've lived through a lot of political nonsesne, but these last 2 years are just mindboggling.  Do these politicians really think the masses are falling for their doublespeak con jobs?  But there is the rub, nothing but a choice of lesser of two evils.  Maybe Ron Paul finally deserves his chance to run.

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