Surprise! Borrowers get to pay for payroll-tax holiday

So you think you got a payroll-tax holiday for free? Think that the big fat-cat mortgage lenders will foot the bill as part of Obama’s promise to make the cut pay for itself? CBS’ Sharyl Attkisson delivers the wake-up call to home buyers, who will pay a pretty penny for the latest gimmick of Obamanomics:

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Guess what?  The fees collected won’t even cover the loss to the Social Security fund.  It’s going into the general fund instead.  Meanwhile, the Obama administration says to quit whining and suck it up so that we can recapitalize the mortgage market:

An Obama administration official defended the mortgage fee, calling it “modest.” She said it’s “unlikely to negatively affect borrowers” because increases “will be phased in over the next two years.” And it will “help bring private capital back into the mortgage market, which [is] good for borrowers over the long term.”

Maybe so. But Patty Anderson only knows that for the next 30 years, she’ll be haunted by the Washington ghost of Christmas past.

“I think it just looks like Washington grabbing more money,” she said.

Remember this, and remember it well — fees placed on businesses get paid by consumers.  Taxes on businesses get paid by consumers.  Businesses pass costs along to consumers, and when they don’t, they don’t remain in business for very long.  As Robert Heinlein once wrote, “There ain’t no such thing as a free lunch.”

As Charles Blahous argues, it’s time we quit passing gimmicky, short-term economic measures and start revamping our tax structure for long-term investment and growth:

The economic policy dynamic would be far better for both sides if ongoing tax rates were permanent. Henceforth both sides could argue for their respective policy visions without being held to the other side’s exploitation of their pending expiration. From a budget process standpoint, the permanence of existing rates may actually matter more than what those specific rates are. We can only have a sensible conversation about our fiscal future if it is not distorted by pending expirations that no one believes will (or should) actually occur.

In recent years this dynamic has grown out of control, with a whole host of new “temporary” policies put into place. In December, 2010, lawmakers adopted a shortsighted policy of temporarily cutting the Social Security payroll tax and funneling general revenues (i.e., income taxes) into the program’s Trust Fund to make up the lost revenues. Originally supposed to be a one-year policy in 2011, it has already been extended for the first two months of 2012 and is likely to be extended through the end of the year at least. Though few believe it is sound policy to convert Social Security piecemeal into an income-tax-financed program, no one wants to be accused of raising the payroll tax, and so the policy continues.

Not one year into the payroll tax cut there came a forceful push for its extension, now likely to lead to greater fiscal pressures than were disclosed at the time of its original enactment. Indeed, many advocates already believe that they should be able to count on the tax cut’s extension as a given. In one recent Washington Post article, an economist was quoted as saying (of the payroll tax cut’s pending expiration), “This is just ridiculous. I never thought as an economist I would have to spend so much time doing political analysis. It’s hard to plan ahead when every policy decision waits until the last possible minute.” But it is folly to believe that temporary policies can ever come unaccompanied by political uncertainty. …

If the two sides could gloss over their long-term policy differences just long enough to agree to do away with the array of pseudo-temporary policies, both would benefit enormously. It would also become far easier for the two sides to negotiate adjustments to current policies going forward than it is in the current environment. The next president, whoever he is, could improve our fiscal practices enormously simply by leading a frontal, bipartisan assault on the various “temporary” tax and spending polices of the federal government.

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Indeed.  We are in the Cash for Clunkers era, and while that didn’t start with Barack Obama, that has become the basis of his entire economic policy.

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