On the Brian Lehrer Show today, Peter Coy, economics editor for Bloomberg Businessweek, examines the president's options for "a very specific plan to boost the economy, to create jobs, and to control our deficit.".
The president has talked about extending the pay roll tax cut and federal unemployment benefits, creating an infrastructure bank to fund large-scale building projects, ratifying free-trade legislation and introducing a patent reform bill.
Coy says extending the unemployment benefits might be a short-term solution, but “ a short term band-aid is not the worst thing in the world.”
It may not be enough, but I think it’s something that ought to be done.
The free trade agreements may have a mixed impact on jobs. Unions did not like it and thought that it cut jobs and wages, while manufacturers argue that jobs were created. Either way the costs to consumers do decrease. Coy thinks the infrastructure bank, on the other hand, is a purely positive idea.
I think that infrastructure spending, while it might take a while to roll out, would be a good thing. A, we have real needs, and B, we’re going to be stuck with an under-performing economy for quite some time.
Congressman Paul Ryan and other Republicans have been opposed to any payroll tax cut. He wants instead a permanent extension of the Bush tax cuts. Coy says that Ryan’s take is not very accurate
The effect of the tax rate in the US is not particularly high, after you take into account all the loopholes and exemptions that are built into it. But that’s a priority of his, to get the corporate tax rate down.
Still, Coy said he thinks the chances of a payroll tax cut extension passing Congress is likely.
After the Republicans have harped on the idea that taxes are bad and that tax increases are particularly bad—to say that we should, in effect, increase the pay roll tax by restoring it to it’s ordinary level, to argue that we should not do that seems to cut against the message that they’ve been conveying for so long.
Tax breaks for job creation will likely be in the new plan, possibly coupled with elimination of some subsidies and corporate loopholes. Coy said that would not be, on it’ own, enough to effect the type of economic change needed.
It turns out that even if you eliminate a lot of tax loopholes, but you simultaneously lower rates, then the very top income brackets still come out on net, ahead. The only way that the burden shifts more towards the upper bands of income is, if you keep tax rates were they are, while eliminating some of the loopholes… such as the mortgage interest deduction, which benefits the rich much more than the poor.