Why Trump's payroll tax cut will work
by Tim Worstall | August 10, 2020 12:21 PM
One of the great puzzles of politics is why so many are against President Trump's idea of cutting payroll taxes. The puzzle starts from the fact that this is simply the standard Keynesian thing to do to boost demand in a recession, and as President Richard Nixon said more than a generation ago, "We are all Keynesians now."
The vehement reaction that has greeted this executive order to defer certain payroll tax obligations (though Trump wants to forgive them permanently if he wins the election) is over the top. Maybe an executive order isn't quite the way to do it, and maybe too many don't want Trump to do anything useful this close before the election. But as a piece of economic policy, it seems fine, even admirable.
That standard analysis (and this really is the way everyone's economic models work — the Federal Reserve, the Treasury, near all investment banks, and so on) is that it is possible for an economy to suffer from an insufficiency of demand. This creates an ever widening spiral around the U-bend for the economy, and we think that's a bad idea. The solution is for government to widen the deficit — that is, to increase the gap between what it spends and what it collects in taxes.
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READ MORE: https://www.washingtonexaminer.com/opinion/why-trumps-payroll-tax-cut-will-work
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