Fiscal Cliff averted!

Happy New Year!

I think Mosler had the best comment on the recent deal which averted the fiscal cliff:

So the main thing that happened was my payroll tax holiday expired (I read that this was the only bipartisan bill passed into law in the last 4 years), which will reduce the average family’s take home pay (both working) by over $200/month.

That’s a lot, and its highly regressive. And about as high multiple as you can get, with a lot of that income is leveraged into car payments and mtgs. and other debt service.

The payroll tax holiday was the most stimulative part of the Obama administration's last fiscal program, and in my opinion, represents the best way to manage the balance sheet recession the US is currently in. However, politically, a payroll tax holiday looks as if it is undermining the Social Security program, which is a problem even though it is not true. In addition, this sort of broad based recapitalization doesn't benefit particular constituencies, and thus loses some of its political sparkle through that channel as well.

$200/month is a lot. It's a car payment.