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Originally Posted by sebastian_dangerfield
The distinction between payroll SS taxes and income tax is not so easily brushed away. The people on whom that was raised do, in fact, receive that money back. The income tax you and I pay "goes to money heaven."
Yes, the payroll tax increases did eventually go to spending. However, technically (and yes, I appreciate your wincing at the arguable weakness of this point), the money is owed to the SS fund.
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That was the justification. But reality is rearing it's ugly head. The SS Trust Fund will not be repaid; the money that people paid through payroll tax went to federal spending and will never come back. It was income taxes by a different name and calculation method.
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My criticism, however, remains. If Reagan hadn't borrowed or "stolen" that money through the payroll tax hike, where would it have come from? Do you suggest he'd have been able to fund that spending by keeping income taxes where they were? And recall, he entered office during a terrible recession. Even Obama agrees that retaining low taxes in a recession is a prudent move to avoid killing a recovery.*
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If your criticism is that he should have cut back on govt spending, I'd say we're in agreement. Most economists, however, would disagree with us. Chiefly, Krugman.
*The present debate on the issue is on where to draw the line, not the effectiveness of the policy generally.[/QUOTE]
My criticism is much broader: I don't like the GOP fiscal-bullshit line. "Reagan cut taxes for everyone" is one example, and the Reagan ethos of reducing taxes while increasing spending -- maintaining ridiculous deficits even while the economy is expanding as it did in the late 80s -- got us where we are today.
And yes, I recognize, as Club pointed out, that Obama's deficits are higher than ever. But I think you agree that a massive cut in federal spending or massive tax increase in 2009 would have been disastrous. I have no fundamental problem with deficit spending in a recession, but that's the only time the fed government should be running big deficits.
