Author Box
Articles Categories
All Categories
Articles Resources

Obama's Payroll Tax Cut

February 20, 2012 | Comments: 0 | Views: 138

Often in an attempt to galvanize public opinion and gain political advantage politicians will push foolish minor issues ignoring the bigger picture and inflicting damage on the economy. Adam Smith noted the economy moves with an invisible hand, however there are times when poor management inhibits economic growth. One need only look at the difference between South Korea and North Korea. Same people, same location, same environment yet the difference in politics render the people in North Korea to poverty and starvation while South Korea enjoys world class prosperity.

Obama's payroll tax cut does nothing to stimulate the economy. In fact, it further endangers Social Security. It is unfortunate in an election year no politician is brave enough to talk honestly about Social Security. In reality Social Security is one of the boldest and most innovative government programs ever implemented. It is also one of the most abused and maligned. To understand Social Security we must go beyond the simplistic concept of Marxist Socialism and examine the concepts of labor and rents.

Today as with most days everyone in the US will make use of infrastructure created by past labor. The strength and stability of the US is built on the sacrifice and toil of generations of workers. When you head done the road to tie up a final negotiation that will make you rich, you are standing on the shoulders of giants of imagination and integrity that came before. Every dollar earned owes rent to those who created the infrastructure. Social Security is not an annuity or a retirement program - it never was intended to be one. Social Security is a pay forward system, where the workers of today compensate or pay rent to the workers of the past who built this great country. Nothing is simpler and more patriotic.

When a worker builds a foundation the worker is paid for his labor. Such a foundation can be as simple as a chicken coop or as elaborate as a sky scraper. Left behind is the product of a laborers work. Current value of wages can never fully compensate for the wealth added to society for current and future generations. The longevity of infrastructure and wealth created becomes a common benefit to all. I must note here infrastructure must encompass ideas, inventions and every aspect of society. Even the waitress working at Denny's for minimum wage contributes to the wealth of the nation by providing a 24 hour cafe to enjoy breakfast.

The most logical way to collect rents on society is out of current wages earned. The Social Security Tax becomes the rent we all pay proportionally to make use of the wonderful and useful infrastructure that is the US. Those rents are then distributed to those who due to age or health can no longer work. Talk of raising the retirement age to account for the current age inverted pyramid is simply a way to rob the wealth created by past generations. In fact, recent policy has been geared towards robbing the older generation of their accumulated wealth. Such policies push the US economy into a downward spiral that shifts money out of the hands of the many and into the hands of the few.

Lets look at this. Currently, the US due to excessive deficits has implemented a zero interest rate policy. While such a policy allows the US government to finance a larger share of debt, it robs all others within society. Those patriotic Americans with the foresight to save for the future are penalized for their frugality. Instead of living and spending the interest on their savings they are forced to consume an ever greater share of their saved capital. Such action makes less money available for investment and acts as a transfer conduit to financial institutions that benefit from zero interest rates. The resulting recession causes financial institutions to take fewer risks further putting downward pressure on interest rates and further robbing the older generation of their accumulated wealth.

At the same time deflation as it is currently calculated reduces the payment to Social Security recipients. Since those at retirement age generally consume the majority of their income, money that would be spent in the economy is further reduced contributing to the downward spiral.

When Obama cuts the Payroll Tax, he is then cutting the income to Social Security just at the time when the Baby Boom cohort is reaching retirement age. Such actions reduce the available money for benefits, produce greater debt and will eventually result in higher taxes. By raising interest rates to a nominal level and indexing Social Security benefits to reasonable cost of living index disposable incomes would increase adding to the velocity of the economy and encouraging investment in new enterprises. The grid lock now created is both self defeating and borders on dangerous behavior.

Eric Von Baranov is the Founder & CEO of the Kondratyev Theory Letter (The Letter). Started in 1974, The Letter follows the 50+ year economic long wave theory as originally developed by the 1920s Russian economist Nicolai Kondratieff. Adherence to this cycle provides Eric with insight on a wide range of topics, including economics, politics, culture and technology. Eric has been published by and the Psychic Investigator. He sponsors an online conference at Please note that a new and improved web site is currently under development.

Source: EzineArticles
Was this Helpful ?

Rate this Article

Article Tags:

Payroll Tax Cut


War On The Aged


Zero Interest Rates


Social Security


Economic Policy

The 3 Month Payday Loans is most suitable options for the people who do not possess assets. There are a variety of loan options for the people who are willing to pledge assets against the cash

By: Cameron white l Finance > Personal Finance l July 09, 2013 lViews: 560

For many people, bankruptcy can make their world fall apart. The apparent loss of reputation coupled with the inability to take financial decisions can deter anyone from thinking clearly. But all is

By: noragwilt l Finance > Bankruptcy Lawyers l November 18, 2012 lViews: 304

If you are availing payday loans with monthly payments, it is easy for you to obtain quick money from online lending companies.By getting the best deals of loan, you can save money in terms of

By: Malen Cheks l Finance > Loans l November 16, 2012 lViews: 289

Loans online have become the popular source of income and people can make smart decision of taking it.Now, don’t go anywhere and sit in your home silently. Such deals would bring you money without

By: Marsh Jone l Finance > Loans l November 13, 2012 lViews: 288

Loans for the unemployed would let you feel comfortable with your unstable conditions due to jobless period.If you compare the rates of a few lenders, you would definitely get the suitable lender to

By: kelse roy l Finance > Loans l November 13, 2012 lViews: 467

By taking cash advance for bad credit, it is easy for you to improve your credit status. This loan is useful to relieve financial stress. This loan is totally free from credit verification and

By: Honard Nork l Finance > Loans l November 09, 2012 lViews: 301

So, you just landed a job with a good company on a decent package. The year went fine, and then you saw your colleagues talking about tax planning and filing of returns. But you are totally clueless.

By: Nishant S Agrawall Finance > Taxes Incomel June 20, 2012 lViews: 216

Is there any difference between a credit and deduction? We hear these words almost every day, but what do they mean? Is one better than the other? How can they affect my taxes and my yearly tax

By: Greg J Olsonl Finance > Taxes Incomel May 22, 2012 lViews: 134

There are many ways that people can minimize their taxes, but it often requires a certain degree of planning. Something that planning even need to take place during the and throughout the tax year

By: Greg J Olsonl Finance > Taxes Incomel May 21, 2012 lViews: 149

Why is it that so many Americans living abroad are behind on their tax filing requirements? The reasons are varied and nuanced, but breaking it down and compiling all the various reasons into a few

By: Horace W Reichartl Finance > Taxes Incomel May 15, 2012 lViews: 152

Be it returns, plans or self-assessments; managing tax affairs can often seem complex and daunting. Yet with millions of people unsure if they are paying too much tax, it is important that we are

By: John T Hughesl Finance > Taxes Incomel April 13, 2012 lViews: 168

I also assert that the accountant's copy of the judgment debtor's tax return is discoverable, because of The Internal Revenue Service Restructuring and Reform Bill of 1998 (HR 2676). This bill

By: Mark D Shapirol Finance > Taxes Incomel April 07, 2012 lViews: 213