This morning, the U.S. Census Bureau released its latest Retail Sales figures for September and they went up sharply (1.1percent), with gains in lots of categories. The gains in July and August were revised upwards, too. From an economic growth point of view, this is unequivocally good news. However, history and statistics tell us not to get too excited over a single data point. So, although this is good news, it is clear that economy is not growing as fast as it needs to. That’s why President Obama has proposed cutting payroll taxes in half for 160 million workers next year.
As the Economics and Statistics Administration has already shown, job gains combined with lower taxes equals more spending. That’s why these tax cuts make sense. They help create demand to give the economy a little breathing room while it recovers.
The president’s plan will expand the payroll tax cut passed last December by cutting workers' payroll taxes in half next year. This provision will provide a tax cut of $1,500 to the typical family earning $50,000 a year. As with the payroll tax cut passed in December 2010, the American Jobs Act will specify that Social Security will still receive every dollar it would have gotten otherwise, through a transfer from the General Fund into the Social Security Trust Fund.