NEWBERRY — Employees all over the state noticed a tax jump in their paycheck in January.
That’s because the payroll tax holiday expired Dec. 31 lowering paychecks by two percent which was installed in 2010 as part of an economic stimulus plan, according to Joe Franklin, Newberry College professor and chair of business, behavioral and social sciences department.
“In 2010, the economy was stuck, in the throws of recession and this was a plan to further stimulate the economy,” Franklin said.
“It was designed to put more money into the consumers hand and stimulate the economy,” he said.
“Instead of paying 6.2 percent of pay for FICA for two years, you only had to pay 4.2 percent,” Franklin said.
The payroll holiday from 2010 was made to put more money in the consumers hands so that they would spend the money and keep it moving forward, because of the sputtering economy, Franklin summed up.
Besides the end of the tax holiday, the fiscal cliff was another economic hot topic.
Franklin explains that in 2011, Congress passed the Budget Control Act which called for the creation of a super committee - made of Republicans and Democrats - who was charged with redefining the deficit with measures. In that legislation, the BCA provided for the condition if the committee did not like the solution, then drastic cuts would kick in. However, there was no solution made and the debate extended itself.
The fiscal cliff is made worse because of the over $16 trillion national debt crisis, according to Franklin.
“Unless we have a handle on the national debt and start being fiscally responsible, we can expect to see inflation. It will affect the take home pay more,” said Franklin, “You cannot keep borrowing money like a family cannot keep racking up money on credit cards. It keeps devaluing the dollar. Other countries are not happy with our lack of investment because of our devalued dollar.”
“The fiscal cliff is a series of austere measures we must face or the national debt becomes greater,” said Franklin who points out Greece as a prime example of one country who promised too much and now cannot pay for it.
“There’s no such thing as a free lunch. Somebody has to pay for everything,” Franklin said.
In Newberry County, Franklin said that the average income of a household in Newberry is $43,000 per year. Franklin said that the question at stake is whether a lower paycheck will result in less demand for goods and services which could have a negative impact on the economy.
This is all a part of the confidence interval, he points out.
“If we think the economy will get worse, we’ll spend less. If we think the economy will be better, we’ll buy more. The economy suffers from a lack of demand,” said Franklin who notes that the consumer confidence fell in January.
However, Franklin does point out that most of last year there were signs of encouragement in the housing market, consumer purchasing, consumer confidence and the stock market did well towards the end.
In January, there were issues contributing to people not believing in the strength of a recovery, he said.
What does Newberry County offer?
“Newberry is an encouraging place to be for several reasons,” said Franklin, “It has a vibrant workforce, a community of great resources and the quality of life is good.”
Newberry’s resources include its educational system for kindergarten through 12th grade, the technical college and Newberry College; the arts especially with the Opera House; access to the highway; corporations and industries; the lake; the hospital among other things.
“Probably Newberry’s greatest resource is its people, creative thinkers who want the best for Newberry,” said Franklin.
“The fundamentals - land, labor, entrepreneur, capital, workforce - are in Newberry,” said Franklin who adds that there is opportunity to convert old buildings into something new.
Franklin said there are cycles of ups and downs but he believes the long-term prognosis is “wonderful” but it will take a lot of work along with being responsible with finances.
“Anything dealing with the arts,” would benefit Newberry, Franklin states, including a haven for artists, studios, galleries.
“Arts play a huge role in downtown revitalization,” Franklin said, “The more of an opportunity for performing arts, visual arts, then there will be a catalyst for economic growth.”
Franklin also said that software businesses or computer businesses would be a smart move as well as service industry businesses.
“If you have good people, good things are going to happen and Newberry has good people,” said Franklin.