A few may wise up, but the people who will benefit from this the most, are the people who already take care of their money. So if the government wants to give me a tax cut or an extra check I’ll take it. I still have some debts that need to be paid.

For this reason I was amused by a recent article that bemoaned the American public’s tendancy to use stimulus checks to save or reduce debt rather than spending… In other words, people did exactly the right thing, and the Keynesians-in-charge couldn’t handle it.

Anyhow, I’m actually posting to make a very minor complaint. In your post, you question the tax cut by saying: “…if we as a country are now in this mess as a result of overspending, that we can’t get out of it by spending more.”

A tax cut isn’t spending. It’s a reduction in intake. It’s like working fewer hours, not like buying something. The huge problem with confusing the two is that you (and by this I refer to your article specifically, as well as people in general) break an analogy. When you and I are in financial trouble, we (should) try to fix it by cutting spending. We don’t usually have the liberty of fixing it by ordering our paychecks to get larger — particularly if we can’t increase our work. Yet when our government gets in financial trouble, people start begging it to “get responsible” by raising taxes, usually along with a modest diet of reduced work. In other words, “get responsible” means doing something that would be grossly irresponsible for anyone else: demanding higher paychecks while doing less work.

What the government needs to focus on … well, it’s a list of things, of course. It needs to look at cutting spending and paying down debt (the responsible thing). It needs to axe policies (like inflation) that make getting into debt attractive for it and its citizens. It needs to consider how to balance a smaller paycheck (which is inevitable) with the work it performs — possibly reducing some of the work. It needs to think about how to collect its paycheck without hurting any of its more important goals.

One final point: I like the analogy between cutting taxes and working fewer hours. It’s fruitful, because in certain circumstances either one can earn you more money. If your salary is good but the economy is bad, asking your boss to cut your hours (and pay) can make the difference between keeping and losing your job; in a similar way, cutting taxes can make the difference between your best taxpaying corporations lasting or vanishing (especially in hard economic times).

I’m interested in the thought of cutting the payroll tax, which is half paid by the employee and half by the employer. Such a cut would balance between increasing takehome pay, or decreasing the cost of an employee, meaning that more people keep their jobs (and more new jobs can be created). Of course, one could also change the percentage that gets paid by either the employed or the employer.