In his post yesterday on the House (Republican) bill “to extend the FICA tax holiday”, John Hinderaker explores some issues left unexplored by a mainstream media which seems sometimes all too eager to repeat the administration’s defense of its policies — and criticism of Republicans.
He reminds us that the payroll tax, part of which has been on holiday pays for a popular program:
There are two things going on here, one superficial and one relatively profound. On the surface, this is all about politics. The Democrats, after decades of posing as the guardians of Social Security, have carelessly and out of political expediency undercut the financing of that program in a manner that is likely to be critical. Their only purpose is to be able to characterize Republicans as tax-raisers on the middle class. The Republicans properly refuse to take that bait and instead are going along with the Democrats’ “destroy Social Security first” ploy. This effectively takes the payroll tax extension out of play as a political issue, no matter how the Democrats may try to spin it.
But there is something more serious going on as well. If the payroll tax holiday extension passes–and both parties are now on record as favoring it–the dam will have been breached, and Social Security will be massively insolvent, not at some point in the future, but today.
Read the whole thing.
Seems like this is a tax cut the Democrats aren’t paying for. (Recall how much the incumbent faulted his predecessor contending that Republican didn’t pay for the policies enacted under his watch?) And wonder why we don’t see more scrutiny of the administration’s insistence on taking money out of Social Security.
FROM THE COMMENTS: V the K reports some interesting news and offers some insightful commentary: “Nancy Pelosi claims that Congress shouldn’t even try to pay for the payroll tax cut extension. So, if deficit spending doesn’t matter, why are they so hot to raise taxes?”
Good question.
In the real world, SS has been insolvent for a long time. The last few years, one would think, have shown beyond all doubt that the so-called trust fund (lock box) is a fiction.
The amazing thing to me is not that politicians are so happy to push SS cash flow even further into the red (and only ten or twenty years ahead of projections!) to purchase another term at the trough, is that the noble and smart American people haven’t even noticed (or worse, don’t give a fig).
The average American is more than willing to stick The Children and The Grandchildren with the tab. We’ve been doing it so long now, it just comes naturally.
Nancy Pelosi claims that Congress shouldn’t even try to pay for the payroll tax cut extension. So, if deficit spending doesn’t matter, why are they so hot to raise taxes?
The Social Security trustee report indicated last year (2010) that payments were now larger than revenues.
Left unsaid is what effect, if any, the reduced contributions have on future benefits.
Neo, you can bet Democrats would be bringing up that tidbit if Republicans had proposed the payroll tax cut.
**le Sigh** …An incompetent President and a Do-Nothing Congress. Meanwhile the French and the rest of Continental Europe are learning to speak German.
Wait, this sounds somewhat vaguely-familiar…..
If the people who have invested into Social Security want to see a return, entitlement reform will have to happen. Currently Social Security and Medicare use 8.5% of nonentitlement revenues (federal revenues dedicated to all other programs besides the two). By 2020, the deficits will grow to almost 25%. This means that within 9 years, in order to pay projected benefits to retirees and the disabled, the federal government will have to stop doing about one out of every five things it does today (http://eng.am/poetWU). The federal and state governments are projected to spend $466 billion on Medicaid this year, with costs rising about 8% a year (http://eng.am/ppUTp1).
All of the following solutions will substantially eliminate these problems: Reducing benefit payments by 5% AND increase the retirement age to 70 over time; increasing both the employee and employer contribution immediately by 1.1% for income up to $106,800 (its current limit); reducing benefit payments by 5% AND increase both the employee and employer contribution immediately by 0.05% each year for the next 20 years for income up to $106,800 (its current limit); removing the $106,800 limit and count all income towards the SS tax; decreasing the cost of living adjustment by 1% per year AND raise the retirement age to 67; or taxing income over $106,800 at 3%, index the retirement age to longevity AND decrease cost of living adjustment by 0.5% (http://eng.am/oTlck2).