In his column today, WaPo’s Harold Meyerson begs President Obama to “go big on the economic solutions“:
It’s time to propose a massive second stimulus, offset by some serious tax hikes and budget cuts once the economy regains a semblance of good health. . . .
Economically, the case for a massive stimulus is a good deal stronger than the case for the rather minimal one that you’re calling for — extending unemployment insurance and the payroll tax cut, and establishing an infrastructure bank. A major stimulus is the only conceivable source of substantially increased economic activity and jobs for at least several years. . . . .
Which leaves us with this stark reality: If the federal government doesn’t intervene massively to help the economy, the economy will oscillate between neutral and reverse for many years.
What should that intervention look like? First, don’t just extend the 2-percentage-point reduction in the employee payroll tax, which is normally set at 6.2 percent. Eliminate the tax altogether, for employers and employees, at least temporarily. It would increase by $2,100 the take-home pay, and buying power, of workers making $50,000 annually. It would make it easier for small businesses to resume hiring.
Republicans have been cool even to extending the 2-percentage-point reduction in the employee tax. . . . In fact, the presumably anti-tax GOP habitually supports taxes (payroll and sales, for instance) that don’t annoy the rich — and in the case of the payroll tax, Republicans want to raise it. This is not, however, a politically sustainable position when Americans are struggling to get by.
The payroll tax can’t be suspended indefinitely without compromising Social Security, which it funds. Its suspension should end when unemployment falls to a specified level — say, 7 percent.
We’ll need other, less fleeting forms of stimulus, too. You should call for renewing aid to state and local governments. Infrastructure bank or no, you need a long-term program to make our nation navigable again. (Our knowledge of how to get from A to B has improved, thanks to global-positioning technology, even as the road, airway and rail connections between A and B have declined.)
Those kinds of projects may take years to realize. Your first stimulus failed to establish a fast track for creating less-capital-intensive jobs in maintenance, rehabilitating buildings, and child- and elder care. It deferred job creation to state and local governments, which have taken forever to set up even such relatively low-tech endeavors as home-weatherization projects. This time around, you should acknowledge the bottlenecks in your first stimulus and call for a federal job corps to do this kind of work.
In other words, Meyerson wants more spending, and more taxes, other than the tax that funds our already bankrupt Social Security system, which he wants to stop funding for a few years or so. In other words, he wants Obama to propose a bigger version of what the Democrats enacted in the first two years of his administration.
Yet there is no evidence whatsoever that such measures had any positive effect on the economy or employment. None. To the contrary, there is a strong case to be made that the Democrats’ spending, redistributive policies and threat of tax increases are a major cause of the continued economic malaise.