Occupy Our Homes

Throughout the past few weeks cities throughout the country have removed Occupy protesters from their encampments.  What are they going to do now?

Occupy has responded to these ejections by changing its focus from public spaces toward private property: foreclosed homes.  Recently, CNN.com published an op-ed by Sonia K Katyal and Eduardo M. Penalver.  Read it here.  They recently co-authored a book called Property Outlaws: How Squatters, Pirates and Protesters Improve the Law of Ownership.  In their article on CNN.com they argue that Occupy’s change in tactics – from occupying parks and streets to occupying foreclosed homes – might very well work to their advantage. 

One reason that this might be a successful endeavor is because it could remedy the movement’s most cited shortcoming: a lack of political agenda. Moreover, it can help connect current members of the movement to working-class Americans.  If the Occupy movement is going to be successful (it’s already changed the framework of political discussion) then it will need to have closer ties to unions and working class Americans.  Aligning their causes with foreclosed homes can help the Occupy movement to do just that. 

Possessing physical spaces has had success throughout American history.  Katyal and Penalyer argue that “a straight line runs from the 1930s sit-down strikes in Flint, Michigan, to the 1960 lunch-counter sit-ins to the occupation of Alcatraz by Native American activists in 1969 to Occupy Wall Street”.  They argue that the sit-down strikes arguably laid the groundwork for the enforcement of federal labor laws; the lunch counter sit-ins led to the enactment of Title II of the Civil Rights Act of 1964; and the Alcatraz occupation paved the way for a milestone reversal in Federal Indian policy, leading President Nixon to support tribal self-determination.  For the sake of my country and world, I hope that the Occupy movement has these sorts of success.  We’re in desperate need of them.

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The Takeaway: In the end, occupying foreclosed homes might strengthen the Occupy movement by presenting a tangible political demand and forging closer ties to working-class Americans. 

Is Pirating a Real Problem?

Everyone scoffs at adverts before movies warning viewers of the seriousness of electronic piracy.   Are  SOPA and PIPA – two pieces of federal legislation aimed at combating this problem – the teeth that officials need to reduce piracy or do they go too far in limiting the freedom of internet users? (note: much of the following information was taken from http://bit.ly/zCsGDg)

So what exactly are SOPA and PIPA?

Media companies are always looking for new ways to fight piracy. They've tried suing individual users, getting Internet service providers to take action against subscribers, and working with the U.S. government to shut down domains based in the United States. But none of those actions can stop overseas websites like The Pirate Bay and MegaUpload from infringing copyrights, or prevent Internet users from accessing those sites.

Enter SOPA, in the U.S. House of Representatives, and PIPA, in the U.S. Senate. Both bills are aimed at foreign websites that infringe copyrighted material. The bills are commonly associated with media piracy, but may also apply to counterfeit consumer goods and medication.

Originally, both bills provided two methods for fighting copyright infringement on foreign websites. In one method, the U.S. Department of Justice could seek court orders requiring Internet service providers to block the domain names of infringing sites. For example, Comcast could prevent its customers from accessing thepiratebay.org, although the underlying IP address would still be reachable. This ISP-blocking provision was a major concern among Internet security experts, and both SOPA and PIPA have dropped it.

The other tool would allow rights holders to seek court orders requiring payment providers, advertisers, and search engines to stop doing business with an infringing site. In other words, rights holders would be able to request that funding be cut off from an infringing site, and that search links to that site be removed. The site in question would have five days to appeal any action taken.

Although the House and Senate bills are similar, SOPA is the more extreme of the two. It defines a "foreign infringing site" as any site that is "committing or facilitating" copyright infringement, whereas PIPA is limited to sites with "no significant use other than" copyright infringement.

Arguments Against SOPA and PIPA

Opponents of SOPA and PIPA believe that neither piece of legislation does enough to protect against false accusations. As the Electronic Frontier Foundation argues, provisions in the bill grant immunity to payment processors and ad networks that cut off sites based on a reasonable belief of infringement, so even if claims turn out to be false, only the site suffers.  Because this can get pretty technical, I'd suggest checking out the PCworld.com link above for more details on this. 

Meanwhile, sites that host user-generated content will be under pressure to closely monitor users' behavior. That monitoring already happens on larger sites such as YouTube, but it could be a huge liability for startups, the EFF argues.

Arguments For SOPA and PIPA

SOPA and PIPA supporters argue that tales of a broken Internet are overblown. Cary Sherman, CEO of the Recording Industry Association of America, writes that SOPA clearly defines infringing sites based on Supreme Court holdings and the Digital Millenium Copyright Act, and requires rights holders to follow a strict set of rules when trying to get payment cut off to an infringing site.

What’s Next?

Support for both bills has waned this week.   The authors of the bill have decided to remove the provisions that require Internet service providers to block the domain names of infringing sites. SOPA, has stalled.  Voting on PIPA, however, is scheduled to begin in the Senate on January 24

The Takeaway:   The idea behind SOPA and PIPA – that copyrighted content shouldn’t be stolen – is a good one. Unfortunately, the way that SOPA and PIPA are written, there could be serious unintended consequences if they were passed.   It was only a matter of time until issues like ownership and free-access collided in the cyber world.  Moving forward, this struggle will most likely continue, albeit in different forms.  However, for now it seems that SOPA and PIPA will not pass.

Back to Work

How has the America’s anti-government ethos evolved over the past four years?  

I got Bill Clinton’s new book Back to Work for Christmas and have just now been able to pop it open.  The opening section in his first chapter is wonderful.  He outlines how America’s growing opposition to the role of its own government doesn’t jive with reality.  Clinton writes that the 2010 midterm elections – which were the manifestation of such anti-government sentiments – “seemed to occur in a parallel universe of inflated rhetoric and ferocious but often inaccurate attacks that shed more heat than light”.  Republicans, or at least those that turned out for the elections, argued that the financial crash and the recession that followed, as well as the failure of the U.S. to fully recover from it less than eighteen months after the economy bottomed out, were caused by too much government taxing, spending and regulating, and that life would be restored if the government got out of our way.  As Clinton argues, these attacks were effective, but not all together accurate.  Here are three reasons why:

First, the financial meltdown happened because banks were overleveraged.  In other words, banks had too many risky investments, especially in terrible mortgages called “subprime” mortgages.  There simply wasn’t enough government oversight to prevent the banks from being too risky. If you want to understand the concept of leverage in the banking industry in two minutes click here. 

Second, the meltdown didn’t become a full-scale depression because the government acted to save the financial system from collapse.  The Federal Reserve made massive investments of about $1.2 trillion to stop the financial collapse.  Many people criticize the bailout, known as the Troubled Asset Relief Program (TARP), because of its cost.  In reality it didn’t cost much at all.  It was originally authorized to spend up to $700 billion.  In the end it only spent about $400 billion.  That’s still quite a bit you say?  As it turns out all of it has been paid back!  In fact, we’ve actually made a profit.  How many people walking down “main street” know this?  See Treasury article here.  Criticizing TARP for its cost just doesn’t match with reality. 

Third, according to most economic studies, the stimulus and the rescue of the auto industry succeeded in keeping unemployment 1.5 to 2 percent lower than it would have without it.  Most people inaccurately think that the stimulus was designed to restore the economy to normal levels.  This is partially the Obama Administration’s failure to effectively communicate with the America people. The stimulus wasn’t designed to do this. After the financial meltdown and damage that ensued, the total net loss was several trillion dollars.  The stimulus was $800 billion.  Once again, it wouldn’t make sense for a stimulus to return the economy to normal levels if it is less than half the size of the “hole” it’s trying to fill.  Rather, the stimulus was designed to put a floor under the collapse and begin the recovery. 

It’s an old argument now so I’ll keep it short, but it’s important to remember that those who are “anti-government” now, were painfully silent during the Bush Administration’s tenure in Washington.  They cut taxes and increased spending at roughly twice the rate that it had increased during Clinton’s eight years (thought I know these eight years were marked by unusually high economic growth for some reasons that might have been out of political control).    Also, by the end of Bush’s eight years we had doubled the national debt.  This all occurred before the financial meltdown.  I’m not writing this to blame President Bush.  I am simply asking where the anti-government enthusiasts were for those eight years.

The Takeaway:  While this is probably old news to a lot of you reading this, I bring it up because it is impossible to get out of the economic conundrum we’re in if we don’t understand how we got into it. 

World's Worst Dictators

            2011 saw the fall of four dictators: President Honsi Mubarak of Egypt, Muammar Gaddafi of Libya, Zine El Abidine Ben Ali of Tunisia and Kim Jong-Il of North Korea.  Still, there more than 40 countries that remain under authoritarian rule.  It got me thinking.  Who are the worst of the worst?

I recently found two articles discussing this topic.  One is from Parade Magazine and can be read here.  The other is from MSNBC.com and can be read here.  I’ve decided to rearrange the order somewhat, and my results can be seen below.

Robert Mugabe, (Zimbabwe, 31 years in power): Mugabe, 87, keeps a stranglehold on his people, who face a staggering unemployment rate of more than 85%. In 2008, Mugabe agreed to hold an election, but it became clear that he would accept the result only if he won. His supporters launched attacks on the opposition, killing 163 and torturing or beating 5,000. He ultimately signed a power-sharing agreement with opposition leader Morgan Tsvangirai, but since then Mugabe has broken its terms and installed his own people at the head of every ministry. Meanwhile, health conditions have reached crisis levels. Thousands of Zimbabweans have died from cholera in recent years.

Isaias Afewrki (Eritrea, 20 years in power): Afewerki, 65, once led Eritrea to independence, but today he deprives his citizens of all freedoms. There is no formal constitution, and every male starting at age 18 must enter “national service,” which is forced labor of indefinite length (evaders are jailed or killed). People with unsanctioned religious beliefs are imprisoned and tortured, as are journalists and activists. More than 50,000 Eritreans have escaped to refugee camps in Ethiopia. Western officials allege that Afewerki is aiding Al Qaeda–linked militants in Somalia.

Bashar al-Assad (Syria, 11 years in power): Assad, 46, a trained ophthalmologist, succeeded his father as Syria’s tyrant in chief. As part of the Arab Spring, Syrians began revolting in March, and he responded by ordering the military to bomb and fi re on crowds. Over 3,500 demonstrators (including more than 250 children) have been killed, with over 10,000 jailed or missing at press time. The U.S. and Europe have condemned Assad’s actions, imposing sanctions and calling for his resignation. In an unprecedented move, the Arab League placed economic and political sanctions of its own on member nation Syria after Assad refused to end attacks and to let in monitors.

Omar al-Bashir (Sudan, 22 years in power): Although al-Bashir, 67, took power in a bloodless coup, his reign has been marked by extreme violence. Some progress occurred in 2011—the country was successfully partitioned into two entities, Sudan and the Republic of South Sudan—but the strife continues. In regions under dispute with South Sudan, al- Bashir’s military has bombed civilians, killing untold numbers and causing at least 100,000 to flee. The International Criminal Court (ICC) has charged al-Bashir with genocide, war crimes, and crimes against humanity in Darfur, where an estimated 300,000 have been killed since 2003. The ICC also alleges that he has embezzled billions of dollars.

Islam Karimov (Uzbekistan, 21 years in power): Raised in an orphanage, Karimov, 73, rose through Communist Party ranks to control this former Soviet republic. Activists, journalists, and anyone practicing a religion other than the accepted form of Islam are often jailed, and about 7,000 prisoners are currently being held and tortured. Each fall, university students, teachers, civil servants, and children as young as 9 are forced to live in barracks and harvest cotton under in humane conditions. Karimov’s health is thought to be poor, and some believe his eldest daughter is being groomed to rule.

Thein Sein, (Myanmar, 50 years in power): Since seizing power in a coup nearly 50 years ago, a succession of juntas made up of present and former high-ranking military officials have brutally mismanaged this country and its economy, with its 55 million inhabitants living in starvation. Ethnic minorities continue to suffer—beatings, rapes, bombings, even murder—at the hands of the authorities. But recently the leaders of the Asian nation seem to be taking tiny steps in the right direction. Last year, they held elections, which, although neither free nor fair, resulted in retired General U Thein Sein becoming president and iron-fisted dictator Than Shwe stepping down. (Some observers believe that Than Shwe still wields considerable influence behind the scenes). A parliament was also convened for the first time in 20 years. What’s more, the government has somewhat eased up on the press, rebel groups, and activists like Nobel Peace Prize winner Aung San Suu Kyi, who was released in November 2010 after nearly 20 years of house arrest. Recently, U.S. Secretary of State Hillary Rodham Clinton—the first American in that position to visit in nearly 50 years—traveled to Myanmar and met with Suu Kyi and with the country’s leaders about reforms and improving diplomatic relations. However, soon after she left, the government’s talks with the Kachin, a minority ethnic rebel group, fell apart, leading to violent clashes, displacing some 26,000 people, and demonstrating that any progress in Myanmar is halting and uncertain.

Teodoro Obiang Nguema Mbasogo, (Equatorial Guinea, 32 years in power): Mbasogo, now 69, became president after he overthrew his own uncle, another dictator, in a bloody coup. Under his rule, he has funneled the country’s wealth into private bank accounts which he and his son, the country’s current Minister of Agriculture and Forestry, spend on mansions in the U.S., fast cars in Paris, and the one of the world’s largest super-yachts. While this oil-rich country’s per capita GDP is comparable to Denmark’s, a shocking 80 percent of the population lives on less than $2 a day and it has the second-highest child mortality rate in the world, according to a 2010 report from the University of Washington. Elections are periodically held, but the outcome is inevitably rigged.

Raul Castro (Cuba, 5 years in power): Raul, 80, the younger brother of frail Fidel, 85, has generally maintained his sibling’s legacy of repressive leadership. Raul was named acting President of the Council of State of Cuba in July 2006, assuming presidential duties, and he was officially elected president of Cuba in 2008. The Communist Party of Cuba controls all aspects of the government, and there is no free press. The island nation’s 11.3 million citizens are not allowed to leave the country without permission, which is often denied. However, the number of political prisoners has decreased significantly in the last couple of years, and Raul has introduced some economic reforms, including privatizing some agricultural land and other real estate. Yet unjustly punitive laws persist, including a selectively-enforced prohibition on the unauthorized assembly of more than three people, which is punishable with up to three months in prison and a fine, and a “dangerousness” provision that allows the government to imprison people who seem like they might commit a crime in the future.

Hugo Chavez (Venezuela 12 years in power): In 1992, the first time Chavez tried to take over the government of Venezuala, he was put in prison. Upon being released after serving two years, he founded the Fifth Republic Movement, a socialist democratic party, and he was elected the country’s president, taking office in February 1999. Since then, he has built a military dictatorship in an area that has been historically plagued by them. Now 57, Chavez has largely squelched freedom of the press, persecuted members of the political opposition by arresting and jailing them, stripped power from once-autonomous universities, and turned the independent judiciary into an instrument to hand down heavy sentences to political opponents. Although reportedly suffering from some form of metastatic cancer, Chavez has shown little sign of slowing down and intends to run for re-election next year.

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The Takeaway:  Throughout the world, 2011 was a transformational year for the balance of power between people and their governments.  Hopefully in 2012 we’ll take another step in this rebalance.

2011: Trends and Observations

What will historians write about 2011?

In the U.S. and Europe the merger of globalization and the Information Technology revolution are putting a crunch on the middle-class while in the Middle East and Africa it’s reversing centuries of authoritarian rule. 

That’s a bit of an oversimplification, but it’s the best I could do to put it into one sentence.  

What’s Happened This Year?

1.  Activists protest and burn sections of London.

2. The Arab Spring produces popular rebellions against dictators across the Arab world. To varying degrees Tunisia, Egypt, Libya, Syria, Yemen, Bahrain, Algeria, Iraq, Israel, Jordan, Kuwait, Morocco, Oman and Saudi Arabia have all experienced unusual amounts of protest.  Former Egyptian President Honsi Mubarak, former Libyan President Muammar Gaddafi and former President Zine El Abidine Ben Ali of Tunisia were all driven out of power.  Combined they had had ruled their countries for 96 years.

3.  The Israeli Summer brings 250,000 Israelis into the streets, protesting the lack of affordable housing and the way their country is now dominated by an oligopoly of crony capitalists.

4.  Cities in Greece, Italy, Spain, Ireland and Latvia are overrun by young people protesting against unemployment and increasing economic inequality.   

5.  The Tea Party continues to control the dynamic of American politics by using leverage on the debt ceiling debate, resulting in an unprecedented S&P downgrade of U.S. credit.   
The Eurozone nearly collapses amid worries that Greece and Italy will default.  There are talks of Germany bailing these countries out, but only if a significant fiscal union can be established to ensure this doesn’t happen again. 

That’s enough isn’t it?  I didn’t even mention all the drama with Lindsay Lohan…  Just kidding.

Clearly, it’s been a busy year.  After all, Time Magazine’s Person of the Year was the “Protestor”.  That’s rather unusual.  So, how has the merger of globalization and the Information Technology revolution created the context for these events to occur?  Consider the recent advances in communications technology:  cloud computing, robotics, 4G wireless connectivity, Skype, Facebook, Google, LinkedIn, Twitter, the iPad, and cheap Internet-enabled smartphones.  Together these technologies have allowed more people around the world to get their hands on a piece of the pie. Therefore, to get into the middle class now, you have to study harder, work smarter and adapt quicker than ever before. All this technology and globalization are eliminating more and more “routine” work — the sort of work that once sustained a lot of middle-class lifestyles. This includes the famed manufacturing jobs that were once abundant in America.  Decades ago, you could secure one of these jobs with a high school diploma and they’d provide the means for the American Dream:  a house, wife that stayed home, a couple of kids, a dog, money to pay for your children’s education and a decent retirement.  Not the case anymore.  Even if these sorts of jobs did come back to our country, they wouldn’t pay enough to attain these desirables

Tom Friedman writes that the merger of globalization and I.T. is producing gargantuan profits, which is a bit ironic since we did just escape “The Great Recession” (have we really escaped though?) . He writes that “employers are finding it easier, cheaper and more necessary than ever to replace labor with machines, computers, robots and talented foreign workers. It used to be that only cheap foreign manual labor was easily available; now cheap foreign genius is easily available. This explains why corporations are getting richer and middle-skilled workers poorer. Good jobs do exist, but they require more education or technical skills. Unemployment today still remains relatively low for people with college degrees. But to get one of those degrees and to leverage it for a good job requires everyone to raise their game. It’s hard.”  He’s entirely correct.  The stakes have been raised. 

Take Grinnell College, a rural Iowa college with 1,600 students.  New York Times columnist Jacques Steinber writes that at little Grinnell College in rural Iowa, “nearly one of every 10 applicants being considered for the class of 2015 is from China.” The article noted that dozens of other American colleges and universities are seeing a similar surge as well. And the article added this fact: Half the “applicants from China this year have perfect scores of 800 on the math portion of the SAT.”  Read the full article here.

That’s remarkable. 

Friedman sums up this trend quite nicely:  “We are increasingly taking easy credit, routine work and government jobs and entitlements away from the middle class — at a time when it takes more skill to get and hold a decent job, at a time when citizens have more access to media to organize, protest and challenge authority and at a time when this same merger of globalization and I.T. is creating huge wages for people with global skills (or for those who learn to game the system and get access to money, monopolies or government contracts by being close to those in power) — thus widening income gaps and fueling resentments even more.”

I can’t wait to see what “2012: A Year in Review” will look like.

On a personal note, I’d like to thank anyone who’s reading this post.  Writing this blog has been intellectually and even emotionally satisfying. It’s allowed to me put to paper (wait, that phrase probably won’t exist in 50 years…) what’s been running through my head.  Or should I say “going on in my little grey cells”.   Thanks-

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The Takeaway: There’s no arguing that 2011 wasn’t a historically significant year.  I’m fascinated to see what next year will bring. 

Was the Iraq War Worth It?

Is it too early to answer this question?

In my mind there are really only two logical and coherent answers to this question:  No and maybe.  Let me explain both.  Those who don’t believe that the Iraq War was worthwhile have several justifications.  They include:

• Iraq had no weapons of mass destruction
• Iraq had no significant link to the 9/11 attacks
• The overwhelming cost in human lives and dollars spent
• The irreparable damage to America’s standing in the world

First, the American citizens were sold a “false bill of goods”.  That is to say weapons of mass destruction were the selling point used by the Bush Administration to convince the American people of supporting the war.  As it turned out, there were absolutely no weapons of mass destruction.  There is some controversy as to how ignorant certain members of the Bush Administration were to this point to begin with.  It’s difficult to know.  Many liberals think that the Administration’s use of weapons of mass destruction was really a red herring; that it was a conspiracy to secure more oil.  I have a hard time completely believing that.  My guess is that most people in Bush’s cabinet believed that there were weapons of mass destruction, but that if American troops didn’t find them that would be alright because there were other justifications for the war.  Just my guess. 

Second, Saddam Hussein and the country of Iraq had virtually no ties to the men the hijacked the planes on September 11^th.  The men, who were affiliated with Al-Qaeda were not from Iraq.  They were Saudi Arabian, Egyptian, Lebanese and United Arab Emirati.  In fact, Hussien’s link to Al-Qaeda was weak at best. 

Third, the cost in lives and dollars has been immense.  Nearly 4,500 Americans have died in the eight years of fighting in Iraq.  Thirty thousand Americans have been wounded.  The U.S. has spent nearly $1 trillion in Iraq since 2003.  That’s startling.  Moreover, as with many wars, senior Bush Administration officials undersold the cost of the war dramatically.  For example, in a March 16, 2003 Meet the Press interview of Vice President Dick Cheney, held less than a week before the Iraq War began, host Tim Russert reported that "every analysis said this war itself would cost about $80 billion, recovery of Baghdad, perhaps of Iraq, about $10 billion per year. We should expect as American citizens that this would cost at least $100 billion for a two-year involvement.”  History is filled with wars that have cost more than was originally thought. 

Fourth, by acting relatively unilaterally the U.S. damaged its reputation in the world.  Though much more difficult to quantify than deaths and dollars, the first decade of the twenty-first century was an extremely transformative one.  Unfortunately, many of these changes have been relative declines for the United States.  One of these is the collision of declining world opinion of the U.S. and globalization.  Now other countries don’t need to look to the U.S. for leadership (relatively speaking!) as they once did. 

With all of this being said, how could one argue that the Iraq War might be worth it?

Here’s how:  For centuries the Middle East has been relatively stable.  Don’t confuse stability with high quality of life, however.  Dictators have essentially ruled their countries without any problem from outside forces (there are obviously several exceptions) and certainly not from their own citizens.  This stability has destroyed human capital in the region and thus the conditions were right to produce terrorism.  So, the attacks on September 11^th happen, Saddam Hussein is overthrown and there are rudimentary elections in Iraq. 

Eight years after the U.S. invasion Iraq clearly has turmoil.  There’s no denying that, even if you’re the staunchest of supporters of the war.  This turmoil could lead to something worse, but possibly something better. Fifty years from now historians might see that the overthrow of Saddam Hussein in Iraq was one of the catalysts for positive change in the region.  Perhaps turmoil that was a result of overthrowing Saddam, the subsequent Iraqi elections, and getting rid of the Taliban will have helped lead to getting rid of Mubarak, Gadhafi and others.  As I mentioned earlier, this is the argument that one could make.  It’s necessary to note that the revolutions in Egypt and Libya that rid these countries of their dictators happened at a very specific point in history.  Globalization and the Information Revolution have collided to produce the perfect powder keg of conditions for these revolutions.  Those who make the argument that the Iraq might have been worth it would like to include Saddam’s overthrow as one of the ingredients that created the right historical conditions for the Arab Spring.  You can be the judge of that. 

In the end, history will have to judge if the Iraq War was worth its costs.  Right now, I think the evidence clearly shows that it wasn’t.  The lack of WMDs, Iraq’s tenuous link to Al-Qaeda, loss of American and Iraqi lives and the world’s declined opinion of the U.S. all point to this being a bad decision from the beginning.  I suppose there is the possibility that the messy and complicated turmoil that currently constitutes Iraq could resolve itself into something better than what existed prior to 2003. For our sake and the world’s I hope it does.

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The Takeaway:  No, the Iraq War probably wasn’t worth it, though I desperately hope history proves us wrong.

What's the Deal with the Payroll Tax?

One of the taxes that we pay is called a “payroll tax”.  This is a tax that goes to the federal government, funding programs like social security.  The payroll tax has recently been 6.2%.  However, the stimulus bill spearheaded by President Obama allowed for a one year “holiday” on the payroll tax.  It brought the rate down to 4.2%.  This means that for the past year on average people have gotten an extra $50 in their monthly paychecks.  That totals about $1,000 for the entire year.

Who Does the Tax Cut Apply To?

The tax cut is applied on the first $106,000 of personal income.  Thus, it’s been applied to 160 million Americans.  People making more than $106,000 haven’t gotten the tax cut. 

Did the tax cuts stimulate spending in 2011?

Economists disagree.  There are some economists that believe that the tax cut stimulated spending, especially for those who live paycheck to paycheck.  This is one of the reasons that there is bipartisan support for renewing the payroll tax cut.

The reason it hasn’t already been renewed is because Republicans and Democrats disagree on how to pay for it.  The total cost of the payroll tax cut is around $200 billion.  Republicans don’t want to raise taxes on millionaires to pay for it.  They argue that there are too many small businesses (“job creators”) who would be hurt by this.  Democrats would like to tax millionaires by approximately 2% and would like to roll back some tax breaks for oil companies.

The deadline for renewing the payroll tax comes by the end of the calendar year.  This is also when certain unemployment benefits will expire.   It’ll be interesting!

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The Takeaway:  There are rarely easy solutions in policy matters.  Personally, I think both the payroll tax and unemployment benefits should be extended.  Congress should focus on revamping the tax code to extract more revenue.