Another December and once again payroll tax cuts are "on the table." I opposed them last December. I oppose their extension beyond the end of the year and I adamantly oppose increasing the payroll tax cuts.
"But why?" You ask. "We thought you were a big liberal. All the liberals support the payroll tax cuts."
I oppose the cuts because:
1. In 2011 they cost roughly $120 billion that did not go to support Social Security benefits and accellerated Social Security's inevitable arrival at "cash flow negative" and the depletion of the Social Security Trust Fund.
"That's what the Social Security Trust Fund is for," proponents argue.
True. But the cuts increase demands on the Trust Fund and decrease the number of years it will last.
2. Social Security has succeeded because it was NOT an unfunded entitlement program. It was fully funded. It is threatened because it will, at current levels of contributions, cease being funded when the Social Security Trust Fund runs dry. Contributions should be increased - by crashing through the ceiling on contributions (currently $106,800 of earned income).
"The shortfall will be funded by other taxes or the general fund," my fellow liberals retort.
Right. How long do you expect THAT to last if Obama loses in 2012 and Republicans gain control of both houses? 5 minutes sounds optimistic to me.
3. Tax cuts have NOT proven to be terribly effective tools for economic recovery. More jobs is the best way to raise government revenues and support safety net programs.
Many of my fellow Americans, liberal, conservative and libertarian have been convinced the population demographic dooms safety net programs like Medicare and Social Security. I believe the greatest threat to these programs is not aging baby boomers, but the ever increasing concentration of our nation's wealth in the hands of a shrinking minority of its citizens and the eroding income of the 99 percent.
I am not sure I am a Progressive. I believe our government should pay for what it spends, not borrow to cover operating expenditures. On the other hand, capital expenditures (i.e. infrastructure, education, research and development) can be amortized over time.
For now, it looks to me like it is the liberals who may in the end be responsible for putting the final nail in the coffin of this country's hard-won safety nets. The radical right must be licking their lips in anticipation.
Here's what I think...
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I must respectfully, but thoroughly disagree!
ReplyDeleteOf possible economic stimulus choices, a payroll tax cut is one of the most effective right now because it puts cash back in the hands of those who are most likely to be cutting back their spending or defaulting on debts.
There's an issue of tax fairness, as well. Warren Buffet paid an effective tax rate of 11% on his gross income last year, but payroll isn't effected by deductions. So a self-employed person pays both sides of payroll - 15.3% - even if they don't earn enough to pay a penny in "income" taxes. The status quo ensures that the working poor always pays a higher percent of his/her income for the national upkeep than billionaire investors.
Politically, we pretend that there SS and the general fund are separate entities, but Congress has been spending the surplus for decades. In a very practical sense, it all ends up in the same place.
Now... the idea of a self-funded pension/insurance account might have been a necessary sell in the 1930s, but it doesn't make as much sense today. In fact, it gives Republicans two powerful talking points that resonate with the voters:
*Payroll is the primary federal levy on about 67% of households and this feeds right-wing populism. Every year, the Heritage Report publishes their research and concludes that "only 50% of workers paid any federal [income] taxes!" Working class people hear that statistic, see taxes being taken out of their income, and conclude that they are part of the oppressed John Galt class. So they go vote for Republicans.
*As a personal investment plan, Social Security provides poor returns. Males are not statistically likely to live long enough to get their principle back. Few if any but the longest lived individuals will ever recover their principal and a reasonable amount of interest. By structuring it as such an "individual savings plan," it gives Republicans something to point to and say, "See, if we privatized it, it would be competitive with your 401k!" (There are obvious reasons why it wouldn't, but it gives them something to point to and compare with). Besides, SSI Disability pays people who never worked or paid in, so the individual savings aspect of it falls apart on a few fronts.
And speaking of life expectancy vs. SS returns, there is a significant and growing gap there between the rich and the poor. This is then a growing argument for means testing, since the more the gap widens, the more Social Security becomes a means of subsidizing the retirements of the already well-to-do. As it stands, 10% of all Social Security payments are to households making more than $100k in retirement.
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Overall, Social Security is an incredibly popular program, but I think the basic reason for that is that we don't really want to see old people starving and begging in the streets. I don't think it is popular because it is a regressive tax, and I definitely don't think it would be less popular if we made millionaires chip in!