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Wonkbook: White House considers payroll tax holiday; House libs against Social Security cuts; 25% were unemployed during recession


The White House is considering a push for hundreds of billions of dollars in new stimulative spending, focusing on business tax cuts including a temporary cut in payroll taxes. In part, this is good policy. In part, it's necessary policy. Anne Kornblut and Lori Montgomery quote an unnamed Democratic strategist complaining that the White House has let the issues get away from them in advance of November's election. "'We did the mosque, Katrina, Iraq, and now Middle East peace?' said a Democratic strategist who works closely with multiple candidates and spoke on the condition of anonymity. 'And in between you redo the Oval Office? It has become a joke.'"

Also keep an eye on the increasing mobilization around Social Security. Whatever else the fiscal commission does, it seems likely to come out with some package of reforms for the stories social insurance program. But Republicans aren't very interested in raising payroll taxes, and House liberals have now announced their unified opposition to anything that includes benefit cuts. Oh, and when you read today's jobs report -- and the expectations are that it'll be grim -- keep in mind that a quarter of the currently employed were unemployed at some point in the recession, and many of them report that they're overqualified and underpaid by their new jobs.

It's Friday, finally Friday. Welcome to Wonkbook.

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The Obama administration may introduce a sweeping package of business tax cuts in coming weeks, report Anne Kornblut and Lori Montgomery: "Among the options under consideration are a temporary payroll tax holiday and a permanent extension of the now-expired research and development tax credit, which rewards companies that conduct research into new technologies within the United States...Policy staffers are debating a range of options. For example, a payroll tax holiday - a top priority of many business groups - could be applied only to new hires or extend to current employees. It could be limited to small businesses or extended to larger firms."

FLASHBACK: McConnell advocated a payroll tax cut holiday back in 2009:

Paul Krugman makes the case that stimulus advocates have been vindicated:

The 60+ members of the Congressional Progressive Caucus will oppose any fiscal commission report suggesting cuts to Social Security, reports Brian Beutler: "The CPC has, of course, tried to throw its weight around in the past with little success. Dozens of House Democrats once pledged to vote against a health care bill that didn't include a public option, then lost the tug of war and voted yes. But the Social Security fight is different. The underlying legislation won't embody a goal -- like universal health care -- that progressives had pursued for generations. There's much more reason to take this pledge at face value. The question is whether they can round up enough votes to block a bill if it has broad support among Republicans and conservative Democrats."

The FCC's proposal on net neutrality has been delayed until after the midterms:

A quarter of currently employed people were unemployed at some point during the recession, reports Michael Fletcher: "Re-employed workers were more likely than others to see themselves as overqualified for their jobs, and six in 10 said they either changed careers or seriously considered doing so while they were out of work. Pew's survey of re-employed workers was taken as the nation endures the longest bout of long-term unemployment since World War II. Almost 45 percent of the nation's 14.6 million jobless Americans have been unemployed for at least six months."

'90s pop interlude: Strawberry Story play "Ashlands Road".

Still to come: How immigrants could solve all our problems; Ben Bernanke defends his handling of the financial crisis; a new government agency is searching for a miracle fuel to replace gasoline; employers are shifting health costs to workers due to the economic downturn; Rand says small business workers will benefit from the health-care reform bill; and a profile of Mr. Rogers.


Ben Bernanke admitted to the Financial Crisis Inquiry Commission that regulatory failure enabled the collapse, reports Ariana Eunjung Cha: "Bernanke said the government did not do enough to protect consumers in the marketplace and to force large financial institutions to strengthen their internal risk-management systems or to curtail risky practices...He blamed 'shadow banks' (financial entities that are not regulated depositories that help channel savings into investment); poor risk management by insurers and investors; and the permissive standards of lenders that allowed many households, businesses and financial firms to take on more debt than they could handle, among other factors."

Jobless claims are only down slightly, and productivity has dropped for the first time in two years:

Elizabeth Warren has pulled out of a Harvard class she planned to teach, spurring speculation about a possible appointment:

Lobbyists started targeting the Fed only two days after FinReg passed, reports Michael Crittenden: "The records show Bank of America Corp., J.P. Morgan Chase & Co. and American Express Co. have all met with Fed staff at least once since mid-July to discuss the interchange issue. Goldman Sachs Group Inc., Citigroup Inc. and others have also discussed tough rules for derivatives with government officials...The Fed on Aug. 20 hosted a discussion with a group representing firms that use derivatives to hedge risks--so-called end users. The group included executives from Safeway Inc. and Boeing Co., as well as representatives from the American Petroleum Institute and the U.S. Chamber of Commerce."

Germany's export successes are due in part to a strong Yen:

The Economist warns against placing the whole burden of speeding the recovery on central bankers: "Cheaper money is an obvious offset to tighter budgets and, historically, many of the most successful fiscal adjustments have been matched by looser monetary policy. But these are not ordinary times. Central banks cannot cut short-term rates any further. And in many places the recovery is sluggish for a reason that also renders central banks less effective: economies are deleveraging as households, in particular, rebuild their savings and pay down debt. If people do not want to borrow, monetary policy, although not impotent, gives a smaller lift to the economy than it normally would."

The Economist prefers a mix of monetary and fiscal stimulus:

Steven Pearlstein proposes using the expiring Bush tax cuts to invest in infrastructure: "For several decades, policymakers have tossed around the idea of an National Infrastructure Bank to provide loans and matching grants for highway and transit projects, a new air traffic control system, high-speed rail, clean-energy generation and smart electric grids, and an expansion of state college and university systems. Over the years, this idea has won bipartisan support from business groups, labor unions, governors and big-city mayors. And with interest rates at record lows, construction costs down 25 percent and so many construction workers unemployed, there is no better time to launch such an effort."

Robert Kuttner argues Obama can do a lot to jumpstart the recovery without legislation: "The Labor Department received an additional $25 million in its 2011 appropriation for enforcement of wage and hour standards, and plans are moving forward to revive other areas of enforcement that were deliberately sabotaged for nearly a decade....The other source of leverage, potentially much more effective, is government's power as a contractor. The U.S. government spends half a trillion dollars a year to buy goods and services from the private sector. Federal procurement, directly or indirectly, influences about one job in four in the entire economy. And most large national companies do business with the government."

8-bit nostalgia interlude: An interactive Super Mario Bros mural.

Domestic Policy

Small business employees will benefit from health care reform, writes Kate Pickert: "According to the study, funded in part by a contract from the U.S. Department of Labor, once the Affordable Care Act is fully implemented, 95% of American workers will have health insurance through their jobs, up from 85% today. This increase, say the authors, will be largely driven by more small businesses offering coverage. 'Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform,' asserts the study."

Employers are pushing health care costs onto workers during the downturn, reports David Hilzenrath: "The premiums that employees pay for employer-sponsored family coverage rose an average of 13.7 percent this year, while the amount that employers contribute fell by 0.9 percent, the survey found. For family coverage, workers are paying an average of $3,997, up $482 from last year, while employers are paying an average of $9,773, down $87, according to the survey by the Kaiser Family Foundation and the Health Research & Educational Trust."

The US is suing Arizona sheriff Joe Arpaio for violating immigrants' civil rights, reports Evan Perez: "Mr. Arpaio is the elected sheriff for Maricopa County, where Phoenix is located. He is known for tough policing policies and has become a vocal critic of illegal immigration. He has used his post to carry out operations aimed at detaining immigrants and turning them over to federal law enforcement for deportation...The Justice Department suit, filed in federal court in Phoenix, said the Maricopa County Sheriff's Office receives millions of dollars of federal funding and is required to cooperate with federal investigations as a condition of receiving that money."

Hundreds of millions of Race to the Top dollars are going to developing new testing methods:

Donald Berwick defends health care reform's changes to Medicare:

James Ledbetter sees immigration as our ticket out of the housing crisis: "Until hundreds of thousands of those homes sell, the market is likely to stagnate. So, goes the argument, let's open the borders to immigrants who promise to buy a house. Every year tens of thousands more people apply for the highly coveted H-1B visas than receive them, and even the rejected applicants tend to be highly educated and highly skilled. Expand the number of visas granted, make them contingent on buying a house, and the newcomers will make a fast and substantial dent in the glutted market."

Long-form interlude: Tom Junod's 2008 profile of Mr. Rogers.


The head investigator of the Intergovernmental Panel on Climate Change says its findings still hold:

The temporary Gulf well cap has been removed, reports Harry Weber: "The cap was removed as a prelude to raising the massive piece of equipment underneath that failed to prevent the worst offshore oil spill in U.S. history. The government wants to replace the failed blowout preventer first to deal with any pressure that is caused when a relief well BP has been drilling intersects the blown-out well. Once that intersection occurs sometime after Labor Day, BP is expected to use mud and cement to plug the blown-out well for good from the bottom."

Commercial fishing has reopened in much of the Gulf:

"Smart meters" are not increasing energy prices in California, reports Todd Woody: "An independent review of the smart meters released Thursday found that the devices were functioning properly and attributed the high charges to a heat wave last year that coincided with their installation as well as poor customer service by P.G.&.E. 'They are accurately recording usage and throughout our evaluation we found no systemic issues,' Stacey Wood, an executive with the Structure Group, a Houston consulting company, said on Thursday at a meeting of the California Public Utilities Commission. 'We did identify there were weakness in the focus on customer service.'"

Jim Manzi questions whether polluting countries owe something to countries affected by climate change: "It’s important to remember that most people reading this blog live in a world of legally defined rights and obligations enforced by courts, police, and, ultimately, the monopoly on large-scale force held by government in the form of an army. But the relationships between nation-states and societies don’t have such clear delineations of enforcement and responsibility."

Extreme sports interlude: The world's first ever double backflip in a wheelchair.

Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Pete Souza/White House.

By Ezra Klein  |  September 3, 2010; 6:30 AM ET
Categories:  Wonkbook  
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Next: Stimulus counterfactuals



i wish someone of your stature would do a real investigative report on how g.w. bush and his war machine lopsided our economy by making uncle sam the client of choice, i.e. everyone and their brother started selling something to uncle sam (largely defense, intelligence, and IT things).

so much so, that almost all the capital investment was focused on uncle sam. now when the economy is in a ditch, it's awfully hard to turn the "aircraft carrier" around to normal levels of government spending.

furthermore, if you graph in a spreadsheet (from 1980 to 2008 parameters like GDP, IRS tax receipts, money supply metrics like M1, M2, and M3, etc and other economic metrics like the national deficit, national debt, even track the value of the dollar vs the euro -- like i did, you will find some really interesting and alarming things.

notably it takes at least 21% (in IRS tax receipts) of GDP just to cover the cost of government -- probably lots more since the GOP "reorganized", e.g. homeland security, national intelligence director, etc..

i came to the conclusion that Greenspan and Bernanke at the FED largely contributed to our economic implosion by not using monetary policy to shut down their money machine. in fact, you need only to go back to bernanke's first senate confirmation hearing where he told the members he was going to STOP TRACKING the money supply metric, M3. You know the one that takes into consideration FEDERAL RESERVE REPURCHASE AGREEMENTS WITH LARGE FINANCIAL INSTITUTIONS LIKE COMMERCIAL BANKS.

my conclusion: greenspan and bernanke tried to help gw bush and cheney finance their tax cuts for the rich and wars in iraq and afghanistan by maintaining interest rates near zero and accumulating/recycling much of the toxic financial instruments wall street was creating as "collateral" on those repurchase agreements.

yea, check it out... and push for a federal reserve audit by the GAO. then, maybe, we can see which banks went to the fed for capital, how much they received, how often they were doing it, and what kind of terms they received.

this would make great journalism and educate everyone at the same time.

Posted by: FranknErnest | September 3, 2010 7:32 AM | Report abuse

I can't wait until Joe Arpaio is out of the sherrifing biz.

And I think the most underrated children's programming out there from my childhood was Mr. Roger's Neighborhood, Reading Rainbow, and Pee Wee's Playhouse.

Posted by: MosBen | September 3, 2010 7:35 AM | Report abuse

The Republicans need to listen to themselves! Based on comments from the Rpeublican leadership I almost expect the Republican Party will cheat, deceive, and anger voters in any and all ways necessary to win.

On the other hand, what Party is willing to regulate markets and industry?


Who will stand up for people's right to marry whom ever they love?


Who will fight the freaks who want to teach our children that the Earth was made 6000 years ago?


Which Party had more leaders voting against the war in Iraq?

I can go on, but instead I hope you get the point.

The President promised that he would go after Wall St. regardless of the cost...and he did it. He promised to pass Health Care Reform and followed through. The President negotiated a nuke reduction deal with Russia, re-engineered the Afghanistan war, and began withdrawing our Troops from Iraq. Have you ever seen a POTUS accomplish as much as President Obama in such a short time?

Maybe you don't like everything Obama is doing but I do believe that he and the Democrats are actually delivering to their voters exactly what they said they would.

Like’em or not, the Democrats delivered.

Besides stoking anger at Democrats and Obama, just what is the Republican Party offering? Tax breaks?

We've been down this road before.

Dividing people with emotional exploitation, screaming for tax breaks and ending of industry regulation is all the Republican Party is about and is absolutely funded by the companies that benefit directly from the tax breaks and deregulation.

What does the United States of America deserve for voting for Republicans? An oily, poisoned Gulf of Mexico.

I think it was P.G. O'Rourke who said it best, “Republicans are the party that says government doesn't work, and then get elected and prove it.”

Posted by: ApostasyUSA | September 3, 2010 10:23 AM | Report abuse

Why is it we hear so little about the payroll tax and the effect it can have on boosting the economy? Common sense tells me if you exempt the first $20k or $30k of one's income from the payroll tax you will help businesses and put money in the pockets of people who will actually spend it. At the same time you raise or remove the upper limits currently in place for the high wage earners. Doing this should pay for the exemption to the people trying to survive and perhaps in the process force companies to think a bit more about the heavy pay packages handed out to their top earners. I'm in no position to run the numbers, but what happened to common sense and doing what's best for the country as a whole instead of just catering to our own homebred wingnuts on both ends of the spectrum.

Posted by: somewhereinthemiddle | September 3, 2010 12:20 PM | Report abuse

Why is it we hear so little about the payroll tax and the affect it can have on boosting the economy? Common sense tells me if you exempt the first $20k or $30k of one's income from the payroll tax you will help businesses and put money in the pockets of people who will actually spend it. At the same time you raise or remove the upper limits currently in place for the high wage earners. Doing this should pay for the exemption and perhaps force companies to think a bit more about the heavy pay packages handed out to their top earners. I'm in no position to run the numbers, but what happened to common sense and doing what's best for the country as a whole instead of just catering to the wingnuts on both ends of the political spectrum.

Posted by: somewhereinthemiddle | September 3, 2010 12:24 PM | Report abuse

One thing not mentioned in the Payroll TAx Holiday is the fact that it could reduce your Social Security Payments. Your SS is based upon wages earned and paid in. In the scheme of things, one three-month holiday would make no difference, but longer and it could. Not against it, but should be mentioned.

Posted by: alantich2000 | September 3, 2010 3:50 PM | Report abuse

I recently read a statement to the effect that the real problem with the economy is that the overall statist behavior of this Administration has left both business and individuals with no confidence in the long-term economic prospects of our nation.

Ya think? Ya think maybe everyone has lost confidence because Trojan Marxists are in charge of the economy? Ya think maybe the natural reaction to redistributionists trying to claw wealth away from earners to “redistribute” it to non-earners would be for the earners to hunker down and try to prevent their wealth from being “redistributed”? You know, hunker down, as in not loaning money, not borrowing money, not spending money, not taking risks, not hiring, and not investing. You know, like simply performing no financial transactions at all, since not transacting is the simplest way to keep your wealth from being subject to taxation and redistribution.

It’s simple, actually. Wealth is extracted by the wealth-takers from the wealth-creators when money flows from one place to another, that is, when a financial transaction occurs. The takers have inserted various money-snatching filters in those flows, but when the money-snatching begins to siphon so much of the money that the flows result in a net loss of wealth instead of a net gain in wealth, then those who initiate the flows simply shut them down.

You can visualize a financial transaction as water flowing in a pipe and taxation as a tap the government installs to steal some of the water. The wealth creators open the spigot and some of their wealth flows down the pipe, say, to sprinkle on a field in order to grow some new factories that employ people and produce goods they can buy with their wages. Now, say, a 1000 gallons goes in one end, the government steals 100 gallons from its tap and gives away gallon jugs to buy votes with or whatever, and 900 gallons end up helping the new factories grow. Things still keep on working. The factories grow, people are employed, goods are manufactured, and wealth increases for everyone involved.

Now, suppose the government steals, say 400 gallons to “redistribute” and only 600 gallons get through to grow the new factories. Well, the factories fail to grow, and the wealth creators say, “This isn’t working, the heck with this”, and they close the spigot. Now there’s no new factories and the government gets nothing either. You know, pretty much like the economy we see today under the helm of the Obammunist redistributionists.

Basically, this is simply a modern version of Aesop’s fable, “The Goose That Laid the Golden Eggs”, and the Trojan Marxists currently in charge of the economy are busily eviscerating the goose to reach those last hard to reach golden eggs in order to slice them up and “redistribute” them. It’s no wonder the golden egg supply has dried up, now is it?

Posted by: catnipman | September 4, 2010 1:44 PM | Report abuse

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