It should be remembered: the Editor of THE FIRST STREET JOURNAL wholly supported the end of the Social Security tax “holiday.” From THE WALL STREET JOURNAL:
Wal-Mart Stores Inc. WMT +1.49% on Thursday joined a parade of retailers, restaurants and consumer-goods companies worried about the economic impact of the recently restored federal payroll tax that has left Americans with less money to spend.
The world’s largest retailer, Burger King Worldwide Inc., BKW -0.34% Kraft Foods Group Inc. KRFT -0.80% and others are lowering forecasts and adjusting sales and marketing strategies, expecting consumers with smaller paychecks to dine out less and trade down to less expensive purchases.
The expiration of the payroll tax cuts that knocked 2% off consumers’ take-home pay is having an impact, these companies say. It will ding a household with $65,000 in annual income $1,300 this year, and shift $110 billion overall out of consumers’ hands, estimates Citigroup C -2.05% .
Now, Wal-Mart is stocking more of its shelves with cheaper products, and smaller-size packages of diapers, toilet paper and snacks. Burger King is cutting its Whopper Jr. sandwich to $1.29 from about $2, and focusing advertising on its value menu items rather than higher-price salads or smoothies.
More at the link.
Your Editor supported the end of the two percentage point Social Security tax cut because it is his belief, as he said, that if taxes have to be increased, they should be increased on everybody.
It is unsurprising that a 2% take-home pay cut that almost all working Americans saw would lead to a reduction in consumer spending; real economics — as opposed to the kind of economics practiced by the government — will tell you that, if you have less money to spend, you will spend less money.
And your Editor understands that the looming sequester, which he has also supported, will mean that the federal government will spend less money, and that, too, will have an economic impact.
Let me be clear about this: the restoration of the Social Security tax rate, the tax increases on the top producers, and the spending cuts that will be enforced by the sequester, all involve some pain. But we will have to endure that pain if we ever want to cut government spending; the arguments being made by President Obama and the Democrats to avoid the sequester and, once again, increase taxes on the top producers, are political efforts to avoid the pain for the Democrats’ supporters — the less productive people and the welfare malingerers — and continue along the path on which we have been traveling, a path which has led to a national debt greater than an entire year’s gross domestic product.
Conservatives know that you just can’t have everything you want, and that what you do get has to be paid for; nothing is free. The Democrats have sold a 51% coalition on believing that things really can be free, and that may have won them an election, but it does not change the laws of economics.
We have three, and only three choices:
- We can either raise taxes on every American to levels which would support the profligate spending of the Obama Administration; or
- We can cut spending; or
- We can do a combination of both.
Regardless of which choice is taken, it will be painful. But the choice of the Obama Administration, to raise taxes on only the top producers, and then keep borrowing and borrowing and borrowing, will lead us down the path taken by Greece. We can take some uncomfortable but still endurable pain now, and get our house in order, or we can go just flat broke. Your Editor thinks that the latter choice is no choice at all.