Is this really how we should pay for a payroll tax reduction?

Informative post in The Wall Street Journal about how House Republicans, Senate Democrats, and the Obama Administration are proposing to pay for the extension of the reduction in payroll taxes. The parties are exploring increasing fees that Fannie Mae and Freddie Mac assess lenders when lenders sell their mortgages to Freddie and Fannie.

Payroll taxes are used to pay for items such as social security and unemployment compensation insurance premiums.

At first blush, you have to ask yourself why would Congress and the White House want to continuously risk underfunding social security and unemployment compensation insurance by basically reducing the premiums paid for these programs?

Second, why increase the fees to lenders and not use the increased fees to offset costs for operating Fannie and Freddie?

I hate to use the phrase shell game, but this is simply what this policy boils down to. Breaking and entering at Fannie and Freddie in order to fund a drug fix. This time the drug fix is unfunded expectations.

In addition, how does this policy create jobs and put our resources to work?

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Economy, Political Economy, taxes and tagged , , , . Bookmark the permalink.

One Response to Is this really how we should pay for a payroll tax reduction?

  1. sasoc says:

    Perfectly stated all the way around, and it’s odd how few people have even asked the questions that you have about how payroll tax cuts could possibly be a good idea in the midst of the current fiscal and economic crises.

    “Shell game” is EXACTLY what it is, except that the shells are see-through: anyone with his eyes open can see that moving money around in such ways only weakens structural insolvency of Social Security even further.

    I place mr. Obama’s actions on the payroll tax squarely in the category of his actions around his ban on off-shore drilling — and that category is called ‘Willful Destruction of the USA’. How could he cripple the oil industry in the Gulf states after the BP Oil spill already smashed those states’ economies? Likewise, how could he steal from Social Security and pretend that it will create jobs? These actions have pain for the country without any gain, and they beg the question of what this man’s agenda really is.

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