This week saw a flurry of activity between the Congress, Senate and White House concerning the extension of the payroll tax decrease. On the Left are the Democrats who threw the masses a bone, allowing them to keep more the money that they themselves earned. On the Right, the Republicans attempted a broader legislation, but fell into a political trap created by the Democrats. While the Democrats ultimately prevailed in this political battle, extending the tax break for a mere two additional months, the American people lost.
Excessive debt, both private and sovereign, is the key issue facing the economy. The extension of the payroll tax decrease does not infuse enough cash into the economy to offset the ongoing deleveraging caused by the excessive debt, as well as the hundreds of billions lost on consumer balance sheets due to the depreciation of their largest asset, housing. In addition, Social Security is already under water and heading towards insolvency on a quickening pace due to the aging Baby Boomers and increasing life expectancies. The decrease in payroll deductions merely adds to the Social Security debt problem.
Finally, it has been reported by AFP, among others (posting below) that payroll companies will have significant problems with their software in calculating payrolls given the rules included in the bill passed by Congress and signed by the President. That’s not surprising given the lack of private sector experience for most politicians in Washington.
But, there is good news today. With Christmas comes the prolonged shutdown of Washington DC. The Congress and President have skipped town and no additional damage will come out of Washington until next year.
A Merry Christmas and Happy Hanukah to all!