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(image: DonkeyHotey / flickr)
Senate Democrats are growing concerned about how many extensions the Social Security payroll tax cut has already received and are leaning towards not extending it again when it runs out. From The Hill:
“We’re running into this problem. The critics said, ‘You’ll never get rid of it. It’s going to ultimately jeopardize the Social Security trust fund; the general revenue fund can’t continue to subsidize it.’ And we said, ‘No, it’s going to come to an end,’ ” said Senate Democratic Whip Dick Durbin (Ill.).
“In terms of whether we need more stimulus in our economy, I think we do. But in terms of using this against the Social Security trust fund, I think for credibility we have to keep our word,” he added.
It is easy to understand both sides of this issue. The economy is still weak and could use more stimulus, but that needs to be balanced with long term concerns about what this cut is doing to Social Security. While the lost revenue has technically been made up by the general revenue fund, if we have three or more years of people not paying the full payroll tax we seriously risk creating a new norm.
After keeping the rate artificially low for too long it becomes politically difficult to reverse and it feeds a host of narratives put forward by people who want to undermine the program. It also creates an opening for enemies of the program to push for bad “reforms” like using that 2 percent to instead create private accounts while cutting direct Social Security benefits.
I personally think the possible long term damage to the program is by far the greater of the two concerns and prefer the cut ends.
The fact that this dilemma even exists, though, shows what a terrible move it was for President Obama and Democrats to use a payroll tax cut for stimulus. If they had instead gone with a tax credit or regular tax cut, deciding whether or not to extended it in the face of a bad economy would be much easier. There was no need to possibly jeopardize one of Americas most successful government programs.
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Simpler: We used the working class’s retirement to pay for a stimulus so the 1% would not have to pay their tab.
Your last sentence say it all, Jon … and does not portend well for the future.
DW
this tax cut should never have been approved in the first place – it is a great way to defund SS from the back door.
Don’t suppose we would/could extend the cut but raise the cap???????
And we can count on the Democrats to not implement Republican policies based on what historical evidence over the past 30 years again?
If Obama is reelected, its Bowles/Simpson catfood for all and that further empowers and legitimates Democrats channeling their inner Republican for decades to come.
If we’re going to have to eat catfood, under no matter who wins, Romney or Obama, let’s at least kick the Democrats who practice Republican espionage to the curb as a lesson in moral hazard to future comers.
That is the only way that circumstances have a hope of improving.
raise the cap, do away with the cuts, AND collect all the IOUs that have been placed in the SS box!
I always called it a backdoor de-fund Social Security scam so that when all the people getting the cut wanted to collect for their retirement they’d be able to say “So sorry you already took that money”.
It was/is/shall be 0′s little F-you to anybody who still has a job
There you go again, ngc.
Advocating reasonable, rational, and responsible action.
Worse, you advocate economic justice.
The current political class, which includes the media, will have NONE of it.
Rather than allowing that political class to remove the social contract, which includes the “social safety net”, perhaps the current political class should be removed …?
DW
I’m very surprised by this development, I thought that President Obama used the SS pay roll tax cut as a way of getting the wealthy to pay more for Social Security by taking the lost revenue out of the general fund.
The wealthy pay a much higher share of the taxes in the general fund, so it works out that they now pay a larger percentage of the money it takes to run Social Security.
As long as you don’t cut the benefits of Social Security the wealthy will always be subsiding the Social Security benefits of the rest of us, and it’s so easy to just continue this policy.
Why would the Democrats want to raise taxes on everyone to pay for a program that they just got the wealthy to pay for?
Substituting SS tax cut for the Making Work Pay credit was always a bad idea especially since Republicans agreed to it. They are masters of manipulation while Democrats are doe eyed naifs standing in their oncoming headlights.
How do you figure? After the first 110k high earners don’t pay another cent into SS. The money out of the general fund isn’t made from whole cloth it comes by cutting programs “for the rest of us” since, as you may have noticed we can’t tax the rich more..
Yes, exactly: make up for the money lost at the low end by raising (or eliminating) the limit on the high end.
It was done on purpose. Make the people cheer for their own destruction.
Our employers don’t have to give a raise because the government provided it.
Too bad Washington will use it to cut Social Security benefits.
A tax cut of less than $100/mo. is no real stimulus.
With Clinton hanging out with Peterson, and Obama appointing these guys to a special Debt Reduction task force, the writing is on the wall. The Dems should just march over to the FDR memorial and take one big group dump in the lap of his statue.
Man, I apologize.
I haven’t had my Dos Dos Equis for lunch yet and didn;t allow for the “wind”.
Joe….. sorry. I spoke to DW (above) about this…..that’ll never work. /s
The D’s are just trying to please their “job creator” bosses. Willard though is being tapped to finish the job.
Good post and comments. This is like the abortion debate. If you don’t understand the war of attrition, you’re inclined to compromise occasionally. Many of our progressive blogosphere pubahs supported the Stupak amendment “compromise” in order to get the watered down HC reform.
Every move the plutocrats make is calculated to roll back the New Deal and reinstitute the age of the Robber Barons. The SS tax reduction was an extremely transparent scam to weaken the trust fund in both concept and dollars.
The only interesting question here is whether Democrats were willing participants or are as dumb as stumps.
Not necessarily mutually exclusive options.
Got a lot of smart people here.
Hope you hang around.
Here’s a different idea. I am rather certain no one will do it. But it’s good for a laugh or two. Eliminate the SS tax entirely and fund it out of general revenues as it becomes due. Burn the IOUs in the trust fund so no one is tempted to give it to Wall Street. We don’t have trust funds for military spending, yet we fund it every year. The US government will never be at risk of funding or paying anything it wants for however long it wants so long as the funding or payment is in dollars.
The very worse thing you can do is increase the tax at a time of recession or high unemployment.
The threat to SS is not the trust fund but the availability of real resources and productivity in the future. If we ever become unable to support our seniors as we do today, due to lack of resources, the fund won’t help since the benefits can be changed by congress at any time.
If we eliminate this tax plus medicare tax we will have a nice stimulus package.
Good correction, thank you.
You don’t have to tax them more, we’re already taxing them. Here’s the current tax structure:
Tax Brackets 2012
10% Bracket………$0 – $8,700
15% Bracket………$8,700 – $35,350
25% Bracket………$35,350 – $85,650
28% Bracket………$85,650 – $178,650
33% Bracket………$178,650 – $388,350
35% Bracket………$388,350+
After $110,000 the rich stops paying SS but he keeps paying federal income tax into the general fund at 28%, 33% or 35%.
If you take money from the general fund but aren’t allowed to replace it with revenue where does that money come from? Two options (someone correct me if I’m wrong) you either cut programs or borrow money. A third option would be to print more money I suppose then listen to the right scream about the fed some more.
Yes, I agree, I was just trying to show that while everyone gets a 2% payroll tax cut, the rich keep paying into the general fund long after we’ve hit our yearly salary.
I’d raise the cap on SS payroll tax, collect a Tobin Tax and raise the percentage of income tax to nearer what it has been in the past. Then look at the damn corporations.
We are living in a backwater infrastructure that is falling down around our ears, our public school system has been gutted and the fact that we still don’t provide universal health care is shameful. It’s time the bastards started to pay their fair share again.
You mean SOME of the rich since not all of the rich engage in labor and capital gains are not taxed at that rate.
Quite frankly it’s absurd to suggest the “rich” are the ones paying the $400 a year for the under $20,000. Romney’s tax bracket was essentially a percentage point higher than the under $20,000 set.
I forgot the capital gains givaway…..
Heaven forfend that you ask a business to pay for it’s educated work force or the roads it utilizes to transport its goods or the security it enjoys……that’s redistribution and communism(rolls eyes).
Those corporate people and their bootstraps…dontchaknow.
But because it was done by O and the Democrats, I’m sure it would not generate the same defunding of SS as if the Republicans had done it. What’s the difference between the duopoly of our corporate controlled uniparty system again?
It’s just a question of which way you prefer to die. Would you like a shot to the head (R), or would you rather be gutshot (D)?
You must have missed the class where it was revealed that our (s)elected government representatives were revealed to be corporate puppets serving the 1% at the expense of the 99%, no matter which brand they supposedly represented.
Now there’s a thought!
But wait. That makes too much sense. For any “reform” to be possible, it must do more harm than good. That’s the first rule of Democratic politics these days. They have learned well from their Republican frenemies.
I suspect you’re using two different “tax rates” in your claim. Per my bracket up at #23 a person making $20,000 has a “marginal” tax rate of 15% (the tax rate that applies to the last unit of currency of the tax base). But even here you haven’t accounted for standard decductions and exemptions.
The rate 1% higher that you say Romney paid is his “effective rate”. Total taxes paid vs. total income.
In reality, someone making $20,000 probably has an effective tax rate of 0%. So Romney (and Obama) pay significantly more, in total dollars, and as a percent of income.
They got away with touching the supposed 3 rd rail of politics SSI and nobody in the M$M called them on it. Now, they’ll return guns blazing to take it all. First they need to put Willard in first. Obama will do the same if re-elected but slower.
The payroll tax cut was stupid, stupid, stupid. SS is one of the most successful government programs ever. This was just another attempt at screwing up SS.
Tax cuts are NOT stimulative, these just tend to make the rich, richer. I have NEVER been involved in a business meeting when taxes are used as a reason to expand the business or hire more workers. We need more good middle class jobs so we can increase DEMAND.
I’m pretty f^&king tired of having a Democratic President that seems to be determined to wreck the last of the New Deal and the Great Society. I’ll be voting for somebody to his political left, and if he wants my vote, he can move my way.
Couldn’t agree more, I could never vote for him again.