SOME OF WHAT'S GOING ON AROUND THE ECONOMY AND THE SEQUESTOR.
U.S. consumers have seen better days.
The expiration of the payroll tax holiday earlier this year has taken a 2% chunk out of weekly earnings – a big hit for the lower and middle income Americans. AAA says the price of a gallon of regular gasoline has jumped 47 cents in one month, adding more downward pressure on consumers. And if Congress and the White House cannot find a way to stave off the $1 trillion in across-the-board spending cuts (also referred to as the “sequester”) that hits military and domestic programs before March 1, hundreds of thousands of workers – especially military contractors – could lose their jobs.
Related: It's Time To Worry That Our Government Will Wreck Our Economy Again
The Daily Ticker’s Aaron Task and Henry Blodget both agree that the sequester would adversely impact the U.S. economy, especially at a time when economic output remains weak. The economy contracted in the fourth-quarter of 2012 mainly because of reduced military spending. If the sequester takes effect as planned, employee furloughs in the Defense Department as well as air traffic controllers, meat inspectors and other government workers could begin in April. Washington finds itself in this precarious situation because of a budget stalemate in summer 2011. A “super committee” of Democrats and Republicans were unable to agree to a large-scale deficit reduction package and as a result both parties signed off on the Budget Control Act, which slashed domestic and military spending by $1 trillion over the next decade. The deal between the two parties was designed to force them to come to the negotiating table again to avoid these draconian measures but both sides have been reluctant to make compromises. Republicans refuse to increase taxes and Democrats are unwilling to make steep cuts to popular social programs without additional revenue from higher taxes.
"The expiration of the payroll tax holiday earlier this year has taken a 2% chunk out of weekly earnings"
That tax holiday is one short-term stimulus attempt that I feel hung around too long. Since the FICA tax is a paycheck to paycheck tax__it does have immediate (not delayed) effect. The problem is that holiday moved the assumed projection of Social Security going underwater closer. At this point I think raising the cutoff ceiling further maybe appropriate. It increased to $113700 from $110100 for 2013. No matter what 'all taxes are economically regressive' that cannot be challenged by any economic law. However, conceptually since FICA is a paycheck to paycheck infringement; people generally would budget around that. So raising the ceiling may be less regressive than other choices.