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THE SEATTLE POST-INTELLIGENCER

December 18, 2001, Tuesday , FINAL

SECTION: EDITORIAL, Pg. B6

SPENDING GIMMICK FOR THE MASSES

by MARIANNE MEANS Syndicated columnist

DATELINE: WASHINGTON

In "Gypsy," a veteran stripper advises novice Gypsy Rose Lee that to succeed in her new stage career she's "gotta get a gimmick."

Gypsy becomes a star by dressing elegantly and acting like a lady as she takes off her clothes, a startling show-business stunt that makes her act memorable.

Gimmicks work in politics too.

For instance, the idea of a one-month payroll-tax holiday has taken off with overwhelming bipartisan support. It's the most popular item in the controversial economic stimulus package, which has been stalled in Congress for lack of a consensus about whether to provide more benefits for individuals or speed up tax cuts for big corporations. If the stimulus plan collapses, the concept of a payroll-tax holiday, during which Social Security taxes would be temporarily suspended, might well pass later on its own. This week the holiday was included in a new legislative compromise offered by Sen. Pete Domenici, R-N.M., a former Senate Budget Committee chairman who commands considerable respect on economic issues.

In addition to the tax holiday, Domenici would offer a 20 percent bonus depreciation on the value of new assets, a Republican goal, and 13 extra weeks of unemployment benefits, a Democratic cause.

Senate Majority Leader Tom Daschle, D-S.D., surprised Republicans by rushing to endorse the payroll-tax holiday, on the condition that it be substituted for the excessive, accelerated corporate income-tax cuts that the Republicans want. It is doubtful that the GOP can be persuaded to do that, but as Daschle said, the "components of a deal" are there. We shall see.

The payroll-tax holiday has the advantage of being simple, fair and easily noticed by taxpayers. Budgetary experts say such a one-month reprieve would let taxpayers collectively keep at least $38 billion more than they have now.

It might even encourage the non-rich to go shopping at last. This result would be important because consumer spending drives the economy.

Unfortunately, Christmas will have passed before such a change in company payroll systems could go into effect. But shopping is a year-round sport, and a shriveling economy needs all the help it can get all the time.

The tax-free holiday idea was originally proposed to offer states the option of suspending state sales-tax levies for the 10 days after Thanksgiving in order to stimulate Christmas sales.

The legislation was introduced by Sens. Patty Murray, D-Wash., and Olympia Snowe, R-Maine; and Rep. Lindsey Graham, R-S.C., in late October.

It did not generate enough enthusiasm to pass in a timely way, and it would have been complicated to apply, since each state is likely to have its own ideas about which taxes to lift.

Seven states and the District of Columbia did temporarily halt sales taxes on some goods this fall and reported that retail sales increased during the no-tax period. But five states don't have sales tax, which meant the plan had no congressional interest from those jurisdictions. The idea also seemed unfair, since the rich can always spend more, thus saving more.

To get the states to accept the measure, the federal government would have had to compensate them for the lost revenue, which was estimated at about $6.5 billion.

Although that idea died, it evolved into the plan for a one-month holiday from payroll taxes, which are paid by everyone with a job. This means the Social Security trust fund would lose one month of contributions, but since the federal budget surplus vanished, Social Security benefits are no longer sequestered in a phantom "lock box" but instead come from general revenues like other program spending.

The revenue drop might make a dent in the federal treasury, but it wouldn't be fatal.

The payroll-tax holiday, of course, solves nothing in the long run. Any economic effect would be only temporary. It's a token giveback designed to make people feel good about spending money - and about the kindness of their politicians. It would set a bad precedent, in fact, if families began to think that their payroll taxes were expendable and not essential to keep the government functioning after all.

But what the heck. When it comes to the economy, people have wildly conflicting theories about how to make it rebound. We might as well get a gimmick. At least this one doesn't involve undressing.