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Mitch Daniels has a plan

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I'm impressed by Indiana Gov. Mitch Daniels's op-ed laying out his proposal for "a time-limited, emergency growth program." It's a real plan, with concrete policy ideas that might actually make a difference. It's mercifully free from vague hand-waving about business uncertainty and government spending.

Instead, it begins with a payroll-tax holiday. Daniels would like to see the tax suspended for a full year. He then offers four policies that would "offset the revenue loss twice over," though I'm quite sure the CBO wouldn't agree with that assessment: recalling unspent TARP and stimulus funds; giving the president the power to "impound" congressional spending projects in order to spend less; a federal hiring freeze; and "some sort of regulatory forbearance period in which the job-killing practice of agonizingly slow environmental permitting is suspended."

Daniels thinks it "fanciful" to imagine that the Obama administration would adopt some variant of this plan, but these are hardly alien ideas to them: The White House has been weighing a payroll-tax holiday for weeks; Peter Orszag, in his role as OMB director, proposed a more Congress-friendly variant of Daniels's impounding powers; a hiring freeze is a bit of a blunt tool, but it's not that far off from the discretionary spending freeze that the administration is already supporting. The outlier here is the regulatory forbearance period: I could see the argument for something like this in the financial sector, where regulators got very aggressive at the same time banks got very cautious. But the White House won't buy it in the environmental space.

The convergence is clearest in Daniels's sixth and final suggestion: "Accelerated or full expensing of business investment." As it happens, the administration is announcing a policy to do exactly that later this week. It appears that one of the editors informed Daniels of this, as the paragraph now ends with this parenthetical: "Reports indicate that the administration is about to propose this very idea. If so, good."

From my reporting, the problem wouldn't be in the White House. It would be in Congress. I've asked a number of Republican offices whether they'd be willing to work with the Democrats on a payroll-tax holiday. Without fail, they've told me no, that they no longer support a payroll-tax holiday given the size of the deficit.

By Ezra Klein  |  September 8, 2010; 9:17 AM ET
Categories:  Economic Policy , Stimulus  
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Next: Tom Toles is worth a thousand words

Comments

"I've asked a number of Republican offices whether they'd be willing to work with the Democrats on a payroll-tax holiday. Without fail, they've told me no, that they no longer support a payroll-tax holiday given the size of the deficit."

Your obvious follow up: given the size of the deficit, do you support keeping the Bush tax cut for the wealthiest Americans?

I'd love to hear their responses.

Posted by: jeirvine | September 8, 2010 10:20 AM | Report abuse

Isn't a payroll tax holiday a relatively inefficient form of stimulus?

Posted by: jduptonma | September 8, 2010 10:27 AM | Report abuse

I'm an Indiana resident and wonder about anything Mr. Daniels proposes. After all, he decided it was worth $4 billion to rent our toll road to a foreign entity which projects to make $15 billion off of it over the next 70 years. He never once answered the question, if the foreign entity can make money off of it, why not the state?

Posted by: SteveyP | September 8, 2010 10:53 AM | Report abuse

"Regulatory forbearance period"? Yeah, that would be Daniels's approach. He temporarily balanced the state's budget by selling off its infrastructure (see post on toll road above), and he was quick off the mark to invite BP to dump millions of tons of toxins, including mercury, from its Indiana refinery, into Lake Michigan. The Bush EPA agreed that would be nice.

I'm sorry you're impressed by Daniels. I personally would not trust him with my money.

Posted by: JJenkins2 | September 8, 2010 11:00 AM | Report abuse

A tax cut the exact same size as a spending cut shrinks the economy much less a spending cut greater than the tax cut. This is basic economics. I see Ezra has joined in the great Washington tradition of searching for "serious Republicans."

Posted by: endaround | September 8, 2010 11:07 AM | Report abuse

SteveyP:

Because like most American business people, Daniels is focused on short-term gains and not long-term ones.

Posted by: lol-lol | September 8, 2010 11:16 AM | Report abuse

"Regulatory forbearance" in the Financial Sector is exactly what got us into this mess. How soon we forget!

Posted by: sbaker1 | September 8, 2010 11:37 AM | Report abuse

When a Republican has the courage to say "we should demand that all products that imported into the United States are produced in accordance with US labor, safety and enviromental standards" they are nothing more than shills for their corporate masters.

Lets face it the only people who benefit from current US trade policy are the senior managers and large private shareholders of US corporations and their equivalents in the exporting countries. Of course the Republicans think that those would gladly arbitrage wages and regulatory standards by exporting US jobs are worthy of a tax cut.

Posted by: rds7481 | September 8, 2010 11:46 AM | Report abuse

Any plan with any claim for competence has to start out with a detailed list of what the money is going to be spent on and how that spending translates into a stronger economy. Any idiot can find some way to wave more money at the economy. The intelligence comes in using that money to create a sustainable business that will create sustainable jobs and make American more competitive in the global economy. Nobody has demonstrated much if any ability to succeed in this task over the past decade. The Federal Reserve has already flooded the economy with money. The shorage is anyone who is able to do anything useful with it.

Posted by: dnjake | September 8, 2010 11:47 AM | Report abuse

Given that corporate america is sitting on almost $4b in cash...I don't think regulations are too much of an issue. Its consumer demand and lack of R&D.

Posted by: jjj141 | September 8, 2010 12:10 PM | Report abuse

Our current problem isn't that the marginal cost of hiring new employees is too high due to payroll taxes; it's that there isn't any consumer demand and hence no reason for businesses to hire regardless of how much they have to pay in payroll taxes.

Replacing payroll taxes with other taxes (a national sales tax or carbon tax for instance) might very well be a good approach to increase employment in the long run, but it's a poor fit to the job cataclysm we need to fix right now.

Posted by: redwards95 | September 8, 2010 12:13 PM | Report abuse

Right.

Daniels (and every other Republican) talks about a "Federal hiring freeze". How about a Federal Contractor hiring freeze?

He also called for a Federal pay cut (that you failed to mention) because Federal workers 'earn more' than private sector workers. A belief that has been disproved in numerous reports.

Posted by: jak201 | September 8, 2010 12:34 PM | Report abuse

Ezra Klein has a plan...it's called Journolist.

Posted by: silencedogoodreturns | September 8, 2010 12:40 PM | Report abuse

Wow, Ezra likes a Republican idea? And he wrote about it? The Journolistas must be apoplectic at this heresy. Maybe his sugar was low.

Posted by: stvcar | September 8, 2010 12:54 PM | Report abuse

Lousy post, EK. You'll regret it, once people point out the reality of the plan.

Posted by: AZProgressive | September 8, 2010 1:30 PM | Report abuse

"I'm an Indiana resident and wonder about anything Mr. Daniels proposes. After all, he decided it was worth $4 billion to rent our toll road to a foreign entity which projects to make $15 billion off of it over the next 70 years. He never once answered the question, if the foreign entity can make money off of it, why not the state?"

I'm guessing he wanted the money upfront, not over 70 years. $4 billion is worth $15 billion+ after 70 years at 2% interest.

By the way, Barrons says the deal looks pretty solid for Indiana, at least after the fact.

http://online.barrons.com/article/SB124183159872002803.html#articleTabs_panel_article%3D1

Posted by: justin84 | September 8, 2010 1:54 PM | Report abuse

I like the idea of a payroll tax holiday too. Since the tax is regressive, temporarily suspending it could provide a real jolt to the economy since the people getting taxed the most are the people who are most likely to spend whatever money they have: poor people.

I know the arguments about, "deleveraging" and people paying off debt, thus, no net stimulus from a tax cut/holiday. If the thing holding us back is indeed deleveraging, wouldn't it make more sense to let overleveraged people to keep more money to helo pay off their debt sooner?

(BTW, I'm speaking payroll taxes specifically, not the Bush Tax Cuts for the people with the tophats and monocles).

Thoughts?

Posted by: mezcalero | September 8, 2010 2:54 PM | Report abuse

I wonder if Daniels has a plan to get senators of either party to vote yes on having their pork impounded.

Posted by: pj_camp | September 8, 2010 3:05 PM | Report abuse

"Impoundment" How is this different from the line-item veto which SCOTUS said was unconstitutional?

Posted by: bharshaw | September 8, 2010 3:09 PM | Report abuse

Klein should resign as a columnist. Read the following:

http://www.tnr.com/blog/jonathan-chait/77533/mitch-daniels-wins-the-fiscal-special-olympics

Posted by: garbage1 | September 8, 2010 3:41 PM | Report abuse

"I've asked a number of Republican offices whether they'd be willing to work with the Democrats on a payroll-tax holiday. Without fail, they've told me no, that they no longer support a payroll-tax holiday given the size of the deficit."

So, given the size of the deficit, what action DO Republicans support? Oh yes, tax cuts... but wait... this is a tax cut.

I guess we just have to wait until election season is over, then maybe they'll support action?

Ezra, when the economy is tanking and Republicans control the legislative branch and a Dem is president, which party wins when our gov't fails us?

If republicans win because dems control the presidency, then I expect 2 more years of inaction and nonsense.

Posted by: will12 | September 8, 2010 4:04 PM | Report abuse

"Some sort of regulatory forbearance period in which the job-killing practice of agonizingly slow environmental permitting is suspended."....in other words a brief window to build things that will pollute and destroy the environment for decades (i.e., coal burning power plants, oil refineries....). How short term of him. Nothing like destroying the earth for a little short term job growth. What happened to that fake concern on the deficits and its impact on future generations, our children and our grandchildren.......

Posted by: dean_adams99 | September 8, 2010 4:18 PM | Report abuse

typical g.o.p. smoke and mirrors. just because there's a little more smoke and the mirrors are larger doesn't mean 'the plan' equals squat (it doesn't). chait took all of five minutes to knock this little charade to the moon.

Posted by: jimfilyaw | September 8, 2010 8:23 PM | Report abuse

chait must have taken all of five minutes to knock this little charade to the moon. i'd hate to see what someone like krugman could do to it.

Posted by: jimfilyaw | September 8, 2010 8:25 PM | Report abuse

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