The Republicans handed President Obama a nice tactical victory when they caved in just before Christmas and agreed to extend the payroll tax cut on Obama's terms (with no offsetting program cuts.) But the extension deal is only for two months, which means the battle will be fought all over again in February.
You could say this is double-stupidity on the Republicans' part, since the public will be treated yet again to a debate in which the Democrats want to tax millionaires in order to spare working people a tax hike, while Republicans defend the very rich and demand further cuts in valued programs as the price of avoiding a tax increase on ordinary Americans.
But maybe it's Democrats who have set themselves a trap. Some Social Security advocates contend that Obama's nice partisan victory is hollow if not Pyrrhic.
As you may recall, the worker share of the payroll tax was cut from 6.2 percent to 4.2 percent as a temporary economic stimulus measure. Under the present arrangement, the tax cut will be extended, but not at the expense of the Social Security trust funds, which will be made whole from transfers from general government revenues. So far, so good.
Here's the problem, say progressive critics of the deal.
First, it will never be a good time politically for either party to vote to raise Social Security taxes on working people, even once the economy is back in recovery. So the trust funds will be permanently reliant on subsidy from general government revenues. That, say critics, will make it seem less solvent, and less like an earned benefit, further softening Social Security up for privatization.
Second, if we are going to increase the deficit to stimulate the economy, tax cuts -- even on regressive payroll taxes -- are the weakest form of economic stimulus. Dollar for dollar, public investment is far more effective. So, even though the millionaire battle is a good one, Democrats are once again playing on Republican turf, where the issue is defined as who is the more reliable defender of tax cuts.
Let's take these arguments in turn. In fact, there is no good reason why Social Security has to be funded entirely by payroll taxes. No less than Franklin Roosevelt, in the program's original design, projected that as more and more workers became eligible, general government revenue would have to be part of its financing. And the payroll tax, capped at $107,000 of income and levied on the first dollar of earnings with no deductions or exemptions, is one of our most regressive taxes. Subsidizing Social Security with general revenue is good policy. As long as the system is substantially financed by payroll taxes, the benefit still feels earned.
The devil, of course, is in the details. Making up the Social Security gap with a tax on millionaires is a double win. It makes the tax system more progressive, and it starkly poses alternatives in a way that plays to progressive strengths.
The critics are right, however, that Democrats should be battling for public investments, not tax cuts. Still, when the issue arose of whether to extend the temporary tax relief on worker payroll taxes, there was no way Democrats could have supported what would feel like a tax increase in a jobs recession.
Going forward, how this issue plays out will depend substantially on President Obama. Will he continue to support taxing millionaires as a way of defending Social Security? Or will he revert to his stance during his Bowles-Simpson phase of putting Social Security cuts on the chopping block as part of a grand budget bargain?
That posture, in turn, will depend heavily on how much hell progressive Democrats keep raising whenever their president flirts with Social Security cuts. Shifting from an austerity posture to a stance of emphasizing jobs and defense of social insurance has turned out to be good politics for Obama. So, if nothing else, sheer expediency should push him in a progressive direction.
At the same time, Obama still has a worrisome tendency to position himself above partisan politics and to blame something called "Congress" for legislative blockage rather than blaming the source of the blockage, namely Republican obstruction and extremism. According to the deputy press secretary Joshua Earnest, quoted in the lead political story in Sunday's New York Times, Obama's election year strategy will be to attack "the image of a gridlocked, dysfunctional Congress and a president who is leaving no stone unturned to find solutions to the difficult financial challenges and economic challenges facing the country."
Say what? Who made Congress dysfunctional and gridlocked? Can't Obama savor a partisan victory in which he just helped Republicans marginalize themselves on a popular issue like payroll tax relief without reverting to a posture that accords his own party and the Republican opposition equal blame?
I think those in the progressive camp who worry about the impact of the payroll tax cut on Social Security are mostly addressing the wrong concern. On the other hand, continuing vigilance is needed on Social Security -- and we should never underestimate the capacity of this president to snatch defeat out of the jaws of victory.
Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is A Presidency in Peril.
 |
 |
|
| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
Kuttner makes clear that turning SS into welfare as we knew it is his objective when he calls SS a "regressive tax." Meaning he wants "the rich" to pay for your retirement. FDR was smarter than this... despite the bogus quote that Kuttner attributes to FDR. FDR had to repeatedly remind the SS commission NOT to make it "the dole." He wanted the workers to pay for it themselves "so no damn politician can take it away from them."
Well, that worked fine for 75 years until Obama and the Democrats found a way to destroy Social Security: just take away its funding and call it a "tax holiday." And then make an election issue out of extending that holiday to avoid "a huge tax increase on the poor."
These are lies. They are in fact damn lies.
http://whaÂtthefuckhaÂsobamadoneÂsofar.com/
The above comment was highlighted as abusive but never removed at my request
i assume it was my comment you found abusive. was that because it disagreed with you? or because it said accurately, if not tactfully, that Kuttner doesn't know what he was talking about?
or did the d word offend your sensibilities. Sorry about that, but that's another technical word.
Mark Twain (i think) talked about "lies, damned lies, and statistics." Calling ending the payroll tax holiday a "huge tax raise" is a damned lie. some day you may understand why.
I don't think the f bomb needs to be part of this program.
I've been deleted with 20 favored comments for much less than this.
HP runs a double standard.
That's right.....Social Security was officially in the red and reliant upon borrowed money to stay in business. As we are currently borrowing about 40 cents for every dollar that our government spends it is absolutely STUPID to cut the amount of tax money that we pay into Social Security.
BTW, for those that believe we have a couple of trillion dollars in the "Lock Box"......it's a lie. The money has been spent and worthless IOU's are taking the place where real dollars should be. There is no money in the program other than what is withheld from workers every payday.
In fact, 2010 was the first year that Social Security income was not enough to cover benefits. The fund only received $637 billion from payroll taxes, but paid out $702 billion in benefits (and an additional $9 billion in administration and other fund costs). However, the Fund also took in $24 billion from taxing those benefits, and $119 billion from the interest on the "special issue" securities, and $2 billion in miscellaneous reimbursements.
http://useconomy.about.com/od/glossary/g/Soc_Sec_Trust.htm
you are a little confused. interest you earn on money you saved IS income. however in the long run it does not matter. if current projections hold, a time will come when SS needs to raise its payroll tax... about forty cents per week per year if started now.
but that is IF ONLY the payroll tax holiday is rescinded.
And regarding the payroll tax cuts, rightly or wrongly, Republicans will in the near future tell us how these tax cuts have weakened the retirement programs to the point where we have to drastically cut benefits (and something tells me Obama will be right there agreeing with them).
And I would disagree that it's never good time to talk about raising payroll taxes to support these programs. Arguably, these programs could work fine for many years as is and with good fiscal oversight. But they could be made even stronger and benefits increased to improve the quality of life for seniors with very small increases in the payroll tax rate.
The problem is, both Republicans and Democrats are now so terrified of the Republican "raising taxes" accusations, that we can't even consider strengthening our economy through increased contributions to our own retirement. It is indeed ironic that since Republicans and Democrats are now all about "personally responsibility," it is impossible to think that we can't make the case for increasing our own retirement benefits through (slightly) higher contributions?
Retirement contributions are great things to have. I think the concern right now in compulsory contributions is that Families that are just barely scrapping by currently see this as a luxury rather than anything else, myself included. I think once the economy recovers this will be less of an issue, but until then as the article above correctly notes it is politically unthinkable. (Sadly it was one of the only things the article above correctly noted.)
I think anyone would agree that it is better to broach this subject in a robust economy, but to say "never" just gives credence to the Republican notion that we can never, ever again talking about raising a tax contribution, even one that we directly benefit from.
I also agree that, when we are younger, it is easy to see retirement savings (which is what these programs represent) as a luxury. But as we near retirement, it is extremely disheartening to hear a Democratic President tell someone in their 50's like me that, after paying into these programs for 36 years, he wants me to put my retirement off till age 67.
Raise taxable limit or eliminate entirely.
If your taxable income is over a agreed upon amount from portfolio earnings, limit amount recipients can get so the fund will be solvent.
With defecit spending at 40 cents on the dollar, that pit is a bit too big for just the weathly to fill alone. To suggest otherwise shows blind idealism or severe ineptitude.
The approach must be balanced. i.e. Increased revenue (some form of taxation), and decreased spending. The trouble here is that attempting either in any great fashion in the midst of a recovery could force us into a double dip.
I think this is a recipe for massive Inflation.
https://www.judicialwatch.org/corrupt-politicians-lists/washingtons-ten-most-wanted-corrupt-politicians-for-2011/
If rootytoot is wrong then please post a link instead of merely saying, "Nuh uh."
raising the cap turns SS into welfare as we knew it.... that is it destroys the program.
you don't need to raise the cap... you can raise the "tax" forty cents per week per year so the people who will get the benefit pay for it.
Payroll Tax funding Social Security....................FEDS are panicky about Liquidity so they
reduce the Payroll Tax ?
USA Federal Government is a Ponzi Scheme ! Vote Tea Party. DEMS/GOP are the same.
FEDS now admit they cannot pay Social Security Funds back, ever.