Given the impracticality and general lack of sense behind doing a massive payroll tax at this juncture, it’s not surprising that economic advisers Stephen Moore and Larry Kudlow, two of the most consistently wrong figures in political and economic discourse, are standing behind the idea. Both are disciples of Art Laffer, the largely discredited architect of supply-side economics who has, nevertheless, become a guru for the Trump administration. While many believed that Trump, something of a political tabula rasa in 2016, would deviate from these Republican doctrines, he has instead dutifully promoted them, advocating for impractical, deficit-busting tax cuts that disproportionately help the wealthy at every opportunity. Even with the economy in a tailspin, Trump and his advisers have clung to these discredited ideas.
They are aided by Republicans in Congress, particularly the senate. Many claim to worry that the large unemployment insurance payments are disincentivizing people from seeking work; there is little evidence at hand to suggest this is true. There are growing signs that the actions of Republicans are being driven by ideological concerns, rather than economic worries. Continuing these unemployment payments would, in theory, be the obvious thing to do from a political, as well as economic, perspective: Trump and Republicans could run on their efforts to save the economy and point to the extra money on the campaign trail. Instead, in Congress there are efforts to cut the payments, in some cases significantly, while many are beginning to raise concerns about the ballooning deficit. This, despite the fact that the massive corporate tax cut passed by Republicans and signed into law by President Trump has played an outsize role in the growth of that deficit. Republicans have apparently decided that it would be better to leave a big mess for Joe Biden, the prohibitive favorite to become president in November, than do something to stave off calamity.
Moore and Kudlow have their own brands to protect. Die-hard supply-siders, admitting failure is never an option. They have the same solution to every problem, now and forever. Talking to reporters on Friday, Moore said that he thought abandoning the payroll tax cut could cost the president the election. It was an absurd claim given everything else (economic collapse, global pandemic, widespread incompetence) that’s going on, but it was nevertheless pitched perfective for the Fox Business Channel Cinematic Universe. Moore and Kudlow aren’t really economists, after all—they just play them on TV.
Trump, however, has less of an excuse. He, of all people, should be desperate to put money in people’s pockets, if only because it’s the only solution at hand that might prevent a wider economic collapse among American households. It also makes political sense for Trump to be pushing the maintenance of generous unemployment benefits: As Tim Noah has noted on these pages, those unemployment sweeteners were arguably the best thing that Trump has done for the economy—and there are plenty of skittish Democrats with whom Trump could cut a contrast. And yet, Trump dithers, trying to drum up support for a payroll tax cut that would neither pass Congress or work. He is, as with his response to the coronavirus pandemic itself, paralyzed in a cataclysmic moment. The economic pain that ordinary Americans have endured over the last four months has been real, but it could been much worse. Despite the fact that the outcome is, to some extent, eminently avoidable, in a matter of weeks, it looks like we are going to learn just how bad things can get.