The problem is on the demand side, not the supply side. The supply side will always follow the demand side, and needn't ever be worried about.
Speaking of, the New York Times
has an article out today on the expiration of the poll tax holiday with some good and terrible journalism. The good:
Regardless of who wins the presidential election in November or what compromises Congress strikes in the lame-duck session to keep the economy from automatic tax increases and spending cuts, 160 million American wage earners will probably see their tax bills jump after Jan. 1.
That is when the temporary payroll tax holiday ends. Its expiration means less income in families pocketbooks the tax increase would be about $95 billion in 2013 alone at a time when the economy is little better than it was when the White House reached a deal on the tax break last year.
Independent analysts say that the expiration of the tax cut could shave as much as a percentage point off economic output in 2013, and cost the economy as many as one million jobs. That is because the typical American family had $1,000 in additional income from the lower tax.
The terrible:
The original point of the payroll tax holiday was to stimulate consumer spending and aid middle-income households. But now Congress needs the money as it struggles with vast deficits and believes the economy can withstand the expiration.
That's like saying a perpetual motion machine needs an external energy supply as it struggles to move. Something is amiss here. Either what we have is not a perpetual motion machine, or it does not need an external energy supply. But the sentence as it stands is totally incoherent. Likewise either what we have is a fiat monetary system or Congress is not in need of money as it struggles with vast deficits. Because we do have a fiat monetary system in which all base money is created by the government at the stroke of a key, the sentence is nonsensical. Yet, there it is, asserted as bald fact in our national newspaper of record.
Obama's treasurer is on record supporting the expiration of the holiday.
This has to be a temporary tax cut, said Timothy F. Geithner, the Treasury secretary, testifying before the Senate Budget Committee this year and voicing the view of many in the White House and on Capitol Hill. I dont see any reason to consider supporting its extension.
Apparently, economic growth and one million jobs are not reasons. Repeal the tax on work, demand equal or higher health care and retirement benefits, and demand that the fiscal space for paying these benefits be created, if necessary, through democracy-enhancing progressive taxation on income. Looks like we're all getting a tax raise instead. Or, as I like to describe it, looks like the government is putting the brakes on your spending (and on the economy), for no reason relating to the real world at all.