Temporary tax policies never work

I'd like to focus on one small part of the President's big address from Thursday... this notion of a Payroll Tax Holiday. On Friday, Sen. Paul Ryan had this to say on CNBC :

"The payroll tax cut that, to me, is not a bad idea. It's always good to let people keep more of their own money," Ryan said. "But it's no substitute for fundamental tax reform--for certainty. It's temporary stuff.

"See, what we've learned already from the Keynesian playbook is demand side spending stimulus, temporary tax rebates, which were tried in the Bush administration and didn't work, and this administration--all this stimulus hasn't worked."

This has nothing to do with which party has the majority in Congress, or whether it's a conservative or a liberal in the White House. The bottom line is that temporary fiscal measures never work. The Bush administration tried them. And the Obama administration has tried them. They don't work. Stop doing it!

They might have worked when information moved slowly. But not any more. Decision makers in business look at all of the available information before making a choice. And if that choice involves hiring another employee, their planning horizon is at least three years. An ethical business owner ... and most are highly ethical ... will not make the implied promise of a livelihood to a new employee unless he is confident that he will still be part of the company three years from now. Otherwise, it's better to simply hire a contractor.