Lawrence Summers, former economic advisor to President Obama, says that in order to avert a “lost decade” the United States should increase its payroll tax in order to stimulate economic growth.
In an op-ed for the Washington Post, Summers says, “We averted Depression by acting decisively in 2008 and 2009. Now we can avert a lost decade by recognizing current economic reality.”
The first step to avoid plunging into a lost decade, Summers argues, is to extend and increase the payroll tax cuts Obama negotiated with Congress last year. Summers says the tax cut should be extended to employers as well as employees and the share of the payroll tax cut should be raised from two percent to three percent.
“At a near-term cost of a little more than $200 billion, these measures offer the prospect of significant improvement in economic performance over the next few years translating into significant increases in the tax base and reductions in necessary government outlays,” he writes.
It’s an idea that the White House is considering, but hasn’t commented decisively on yet. Last week White House Press Secretary Jay Carney commented on the proposal.
“Obviously there are a lot of ideas that get bandied about, both within the administration and outside,” he said. “This is an idea that’s been around for a long time, has been supported or has seen expressions of support from the business community, from conservative economists and others. But I don’t have any policy announcement to make.”