One of the nation’s leading economists, and President Obama’s former top economic adviser, says that Washington’s focus on immediate austerity is misplaced, and that efforts to rein in deficits should wait until after one more round of stimulus.
“Fiscal support should be continued and indeed expanded by providing the payroll tax cut to employers as well as employees,” writes Larry Summers in a new op-ed. “Raising the share of the payroll tax cut from 2 percent to 3 percent would be desirable as well. At a near-term cost of a little over $200 billion, these measures offer the prospect of significant improvement in economic performance over the next few years translating into significant increases in the tax base and reductions in necessary government outlays.”
In the tax cut deal the White House and Congress negotiated last year, President Obama agreed to extend the Bush tax cuts for two years, in exchange for a one-year extension of unemployment benefits and a substantial, year-long payroll tax cut for employees.
Summers says that the cut should be extended and deepened into 2012, and should also be offered to employers, who also pay taxes for workers they employ.
