When the payroll tax was first proposed last year I thought it was an inherently bad idea. While the economy needed a stimulus, it should never have taken the form of messing with the basic social contract that is the foundation of our social safety net. Democrats supporting a cut in the payroll tax, even if the Social Security Trust fund was reimbursed from the general fund, created the impression that Congress can, whenever it chooses, mess with Social Security funding.
Now that Democrats are again asking to extend and even increase the cut in the payroll tax, it creates the opening for Republicans to offer dangerous counter proposals like this. From the Hill:
Under the bill offered by Rep. Jeff Landry (R-La.), taxpayers who opt to continue the 2 percent payroll tax cut next year would, in effect, pay for that cut themselves, by delaying the receipt of their Social Security benefits by one month. Taxpayers could continue to make this arrangement each year, adding another another month’s delay for Social Security each time.
Those who decide not to extend the 2 percent cut would not have to delay the receipt of Social Security benefits.
This is basically a backdoor path to private accounts, without the guarantee that people will be encouraged or able to invest for their retirement.
This bill isn’t going anywhere now, but I think it is a good example of how in the near future the GOP might exploit the idea that messing with the payroll tax is an acceptable “bipartisan” stimulus measure, even if it undermines Social Security in the long term. In the future, Republicans could easily use Democratic rhetoric that restoring the payroll tax would be a “massive middle class tax increase” as a way to attack Social Security.
At the very least these payroll tax cuts serve to reinforce the myth that Social Security is part of the cause of our deficit problems. They could also be used by some to argue that young people are no longer entitled to full Social Security, because they didn’t fully pay for it.
If you want more stimulus, that’s fine. But there is no reason it needs to be done in a way that undermines the basic principles and logic behind our social insurance systems.