The writer, of Omaha, is a law professor at Creighton University. These opinions are not affiliated with Creighton.
In the early days of our republic, political candidates found it necessary to ply their constituents with whiskey and other spirits to garner their electoral support. Excess consumption in those times undoubtedly produced a few hangovers after Election Day, and perhaps even some buyer's remorse when the election results were final.
But at least in those days, the headache that followed would not last too long, and it was just a headache. Remarkably, as corrupt as those elections may seem to us, we managed to get competent leaders.
Recent shenanigans involving the payroll tax holiday remind us that an election year is just around the corner and the political ruling class is buying whiskey a little early this year.
The U.S. Senate, supposedly full of senior statesmen insulated from the fickle winds of popular opinion, agreed to extend a payroll tax holiday for two months, along with a few other goodies. This was to be paid for by enacting additional fees on mortgages through Fannie Mae and Freddie Mac, thus affecting the cost of loans in the future.
Fine print reveals that these two months of benefits would depend on revenues collected over the next 10 years, a dubious proposition made all the more so by the tenuous financial condition of these firms. Sadly, this approach is all too common — and all too dishonest. (If you are looking for a loan to finance a spending binge, I don't recommend trying this approach with your banker. It only works in Washington.)
When the House failed to bow to the wisdom of its senior colleagues, President Barack Obama mobilized his political machine to gather the disaffected and fill the news headlines concerning the negative impacts of raising taxes. Even the venerable Wall Street Journal could not resist criticizing the House, but such criticism was primarily based on bad politics, not bad policy.
Backpedaling and stammering, House leaders eventually relented, promising a yearlong tax holiday when they returned. President Obama got his wish to confer a gift on working Americans for the holidays. But what messages should we garner from this political circus?
First, I hope the president listened to the people. They told the president that if government took more from them and checks were reduced, they would cut other spending. These folks weren't going to be drawing down their IRAs or getting a long-term loan to continue family pizza night, if that is what it came to. They would prioritize and act like adults.
Shouldn't we expect similar behavior from our elected officials? Will that message be recalled when discussion turns to other tax hikes?
Second, while a payroll tax holiday may be a popular approach to short-term stimulus, most agree that it has no appreciable effect on long-term growth prospects. A short-term raise is nice, but it does not induce anyone to create new jobs nor does it enhance productivity, which makes real wage growth possible.
The real potential for moving the economy out of the doldrums can be found in the realm of productive behavior, not short-term reallocation. This message does not seem to be getting through, either.
Third, our government apparently does not understand that it is spending beyond its means. Cutting the payroll tax undermines Social Security and contributes to its looming insolvency. However, cutting spending is apparently not on the table, despite the fact that White House budget figures show government outlays in 2011 over $1 trillion greater than four years ago, with more increases to come. We can live with less government; we have done so for many years! But that message also seems lost.
I am sure all of us will enjoy our tax holiday. But if our government continues behaving like this, the cure for this headache will be painful indeed. Let's hope we can all sober up and return our fiscal house to order in the New Year.