Paul Krugman made an important point on twitter:
If the goal of a short-term stimulus is to put money in people’s hands, then we should put money in people’s hands: just mail out checks. There is no reason to structure it as a payroll tax cut, which does nothing for those not getting paychecks.
There’s also a powerful case for aid to state and local governments trying to cope with this crisis — which would also help sustain spending. So why a tax cut?
The answer, I suspect, is that Trump and his party want to maintain the pretense that tax cuts are the answer to all problems, even when in practice they’re being purely Keynesian right now. There’s no reason Dems should let this prejudice intrude on a rescue package Trump desperately wants. They can and should demand a package that makes sense.
I tweeted they should just write checks yesterday because I fully expect the Republicans to insist that “entitlements” be cut should payroll taxes decrease since they are dedicated to financing Social Security and Medicare. (Yes, I know that’s a fiction, federal money is fungible and MMT says that you don’t have to worry about such things, but I’m speaking about the politics of it.) Democrats should resist this.
Anyway, Trump’s idea was half-baked at best:
[I]nside the administration, some officials were stunned by Trump’s claim Monday that he would hold a press conference Tuesday to announce an economic plan. “That was news to everyone on the inside,” one official said.
The actual details of any plan remain up in the air. “It’s not there right now,” an official said. “A lot of details need to be worked out.”
The president’s schedule for Tuesday included a 5:30 p.m. ET media briefing for his coronavirus task force.
In addition to the potential payroll tax cut, which faces skepticism from Senate Republicans, Trump also said the administration would work with travel industry players, such as airlines and cruise lines, as travel restrictions and fears stemming from the outbreak take a toll on them. American Airlines on Tuesday, for instance, slashed international and domestic flights as demand craters.
Republicans in congress didn’t get a heads up either. Trump went up there today and they’re apparently starting to work on something but we don’t know any of the details yet.
Pence said in the briefing today that they plan to “help” businesses pay for people to stay home from work but it’s hard to see how a payroll tax would do that. Eliminating taxes from a non-existent paycheck doesn’t get you very far.
Kudlow sounded completely incoherent in today’s briefing. He said that they are thinking about completely eliminating the payroll tax which would cost a trillion dollars and eliminate the dedicated Social Security trust fund. When questioned further he said that they needed to get the details clarified. Jesus.
He did say that the middle and lower-income people have done GREAT in Trump’s fantastic economy and that it’s important that we do tax reform and cut more taxes so we can have huge growth and then everything will be EVEN GREATER!
God help us.
Posted with permission of Hullabaloo
