Stimulating the economy with your money

Writing for The Huffington Post, Paul Kleyman talks about the very real shortcomings of the 2% payroll tax recently extended by Congress.  His point being it’s really not much of a cut for working families and that there were better ways to get money in workers (voters) hands (he is right about that). Here is a small part of what he said.

In other words, by giving everyone a 2 percent cut, Washington has gifted more money to wealthier people, those apt to salt the savings away in their banks, and less to middle and working class people, who would be more likely to spend it on rent, groceries and maybe a few holiday gifts.

So, it appears that within the last few years we have developed a society of poor middle – income Americans despite low inflation and interest rates. So much so that the two percent temporary tax cut will go to rent or groceries, and this among people who are working. No doubt everyone can find a way to spend two percent more in take home pay (if they even notice it is there), but it appears the media can’t resist playing up the idea that everyone short of the infamous 1% is poor. I’ll believe that when I start seeing nail salons, beauty salons, Chinese restaurants and Dunkin Donut shops going out of business.

While some people are spending their 2% on rent and groceries, others in the group attending a White House photo op promoting the tax cut said they were using it to give to charity or to go out to dinner. In any case, spending on necessities or donating the money hardly sounds like economic stimulus.

Whether it is a payroll  tax holiday or some other refund or rebate, it all boils down to one thing  the government giving you back your own money that has already spent on something else.  Doesnt that beg the question why the money was collected in the first place? This is not about stimulating much of anything other than your undying gratitude for the politician of your choice.

Related articles

• Paul Kleyman: Media Fail to Tell Full “Tax Holiday” Story (huffingtonpost.com)