The 2% payroll tax reduction won't cut Social Security funding by a single penny.

[Statistical]

That is all. I don't expect many to listen to fact they are boring and often ruin an otherwise utterly pleasant rant.

We now return you to the previously scheduled doom & glooming, already in progress.

[VMI Dem]

1. Cut it by 50%.

That would be super sweet.

[Statistical]

18. If you had $378B (either in spending cuts, other tax increases, or deficit spending)

you could cut it 100% and make no change in SS funding.

0% employee SS contribution rate = $378B less into SS + $378B from general fund = $0.00 change in SS funding.

[Pholus]

2. Took a while to figure out why we needed this. But it makes a bit more sense now...

http://www.huffingtonpost.com/rj-eskow/obamas-tax-holiday-a-pois_b_793526.html

[neverforget]

3. link?

[WCGreen]

4. Prove it!

[leftstreet]

5. +1

[Statistical]

7. Sometimes self research can be satisfying... but I'll give you the cheat sheet.

"Progressive economists have worried that a payroll tax break along the lines of the one announced tonight could come back to bite Democrats if it undermined the solvency of Social Security. But officials tonight insisted that its cost to the Social Security trust fund will be reimbursed with a credit from general revenue."

http://tpmdc.talkingpointsmemo.com/2010/12/unhappy-dems-mull-obama-gop-tax-cut-deal.php

-----------------

Here is another way to think about it. The payroll tax reduction will "cost" $120B. That has been quoted by multiple sources. If one was simply cutting SS funding it would cost $0.0. Why does it cost $120B? Because the CBO has calculated that 2% SS tax is $120 thus Congress will need to add a $120B line item to budget to "balance SS".

$120B less contributed by workers + $120B contributed by general fund = $0.00 change in SS funding for 2011.

[Pholus]

9. Can you suggest a cheap, yet tasty cat food?

Edit. Was good, but by good I meant cheap since that is what I'll have to buy.

[Statistical]

12. I recommend "Doom & Gloom" brand it is preferred by DU members 10:1 over "Justs the facts ma'am"

[Pholus]

14. Historically has Social Security ever been funded by an increase in the deficit?

[Statistical]

16. No but regardless of what happens today in 2016 SS will have to be paid for by the general fund.

Starting in 2016 expected payouts will exceed revenue. At which point Congress will need to begin repaying those IOU in trust fund by using funds from general fund. At least some portion of those will be via debt financing (unless we have a balanced budget ammendment). Speaking of balanced budgment amendment. If we had one today the 2% SS funding would be paid for not by deficit funding but by cutting other spending (DOD?).

[Pholus]

17. After today it certainly won't be by raising tax rates on the richest 1%, will it? :P

[Statistical]

21. Honestly....

the cold hard reality is the US is a dying empire. We need to cut back military spending by 50% or more, close foreign bases, scale back internation operations, scale back state dept and accept we are one on many peers in the world.

Doing that would free up hundreds of billions to pay for the coming costs of repaying SS bonds. I am not saying we WILL do that but we NEED to do that. If history is any guide we like every empire before will stubbornly climb to the idea that we are a hegemony and continue to spend with reckless abandon. Eventually collapsing. After the collapse might not be that bad. Take UK today. The British empire imploded and caused decades of chaos but UK is rather strong, vibrant state today.

Yes we should raise taxes on rich but we also need to accept that the post-WWII empire was a once in a milenium event and we simply can't sustain it.

[lumberjack_jeff]

25. It's part of the bigger goal of co-mingling the SS trust fund and the general budget.

Economically, it's not so bad; it puts money into the pockets of working people who will spend it. Spending IS hiring.

As policy on the other hand, it sucks. By transferring the money from the general fund into the SS trust fund, they further muddy the waters about what should be a clear distinction; the only relationship that Social Security should have to the general fund is an enforceable loaner/borrower relationship.

Look at it another way; "Social Security is in crisis" because 30 years from now, the trust fund is projected to be depleted, and retirees might look to the general fund to make up the shortfall. If that is the fundamental crisis, then why is Obama wanting to do exactly that, 30 years early?

The overriding goal from Washington is to find a way to stir the Social Security budget into the federal budget so that the rich are forever relieved from repaying the tax cuts they began borrowing from workers in 1983.

[Statistical]

30. Paying for SS from general fund is inevitable.

By 2016 SS will have to pay more in benefits than it receives in FICA taxes. To continue payments will require an infusion of cash.

To do so SSA will redeem Treasury bonds in return for cash. So SSA hands over $5B bond, Congress exchanges it for $5B in cash.
This WILL happen and in less than 6 years. The only way to avoid that would be raising taxes and/or cutting benefits in the next 6 years.

So doing it in 2011 instead of 2016 doesn't really amount to a whole hill of beans does it?

[WCGreen]

32. The main part of the debt is chits to the social security trust fund....

[RaleighNCDUer]

42. You never heard of compound interest?

Starting paying from the bonds 5 years earlier means a cascading of lost revenue - the faster we use those bonds, the sooner they will be all gone and instead of facing insolvency in 2048, just as all the boomers are dying off and relieving the strain on SS, we will see insolvency by 2029, and then we are FUCKED.

You've never been in a position of seeing your expenses overrun your income, have you. As you dip into savings, the interest on those savings declines. That results in a greater hit on savings the next month, and again the month after.

What's that 2% mean to me? That means i will keep, over the period of a year, an amount equal to what my monthly SS benefit will be. The trade off? SS is broke, insolvent, in less than 20 years. If it is not abolished before then and tuned over to Wall Street - which is exactly where this is leading. SS will just be another 401k, subject to whatever the next fucking bubble will be.

This is indefensible.

[Statistical]

44. Nope.

They are not cashing SSA bonds. No change in compounded interest, no change in value of SSA trust fund, no change in benefits, no change in anything.

The general fund will be issuing a $120B credit to SSA in lieu of the $120B that would have come from the 2% not taken from workers.

Net net there is absolutely no change in SSA balance. $120B from Congress vs $120B from workers.

"The trade off? SS is broke, insolvent, in less than 20 years."
Doom & Gloom utter BS. There will be absolutely no change in SS. The trust fund balance won't change a single cent.

[RaleighNCDUer]

50. When you borrow money, you have to pay interest.

We are borrowing 900 BILLION dollars, because of this travesty - a good part of which is totally unnecessary.

What's the interest on 900 BILLION dollars? Who pays that interest?

You don't believe what you are saying yourself - in your previous post you said we would have to start cashing out those bonds in 2016, and there would be no difference if we started cashing them out in 2011. Now, you are saying we aren't touching them.

Can't have it both ways.

And where does that 120B credit come from? General fund? That means TAX REVENUES. Revenues we are not collecting. Therefore, which we are BORROWING. With interest.

Do you really think the government can just print money?

[Statistical]

51. Of course we are borrowing it but that doesn't affect SS solvency.

We are borrowing huge amounts of money.

We borrowed huge amounts of money when there was no reason to ("good times").

However you can't have a stimulus without deficit spending. You do understand that right.

In essence we are borrowing $120B so that people have $120B more in paychecks and hopefully spend it on food, gasoline, movies, ping pong tables, etc. That is the VERY definition of stimulus. I never said we are cashing SSA bonds today. Please re-read before making false claims.

This move puts $120B in workers hands and has $0.00 change in funding of SSA trust fund. Period.
Does it increase deficit? Yes to the tune of $120B.
Will we pay interest on that debt? Of course.

However that is the POINT OF A STIMULUS. YOU CAN'T STIMULATE AN ECONOMY VIA FISCAL POLICY WITHOUT CREATION OF DEBT. PERIOD.


"Do you really think the government can just print money?"
You really think the govt can't? What do you think quantitative easing is?

1) Govt issues debt
2) Fed creates money from nothing
2) Fed uses money to purchase debt.
What has just happened. That debt has been removed from supply and the money used to pay for it added to supply. "Printing money" except today it is all just 101010101 in a computer. Nobody actually prints anything. Hell they don't even print the bond before the debt remove it from supply.

You are aware the Fed directly manipulates money supply (M3) to control interest rates & (and indirectly encourages/discourages growth & inflation). To do that it MUST create and destroy money. You can't control interest rates without "controlling" (nice way of saying printing and destroying) money. This has been going on for roughly 50 years now so it isn't exactly a "new" concept.

[lumberjack_jeff]

57. No. In 2016, the SSTF will begin redeeming federal bonds.

There's a difference between infusing the SSTF with general fund cash, and the SSTF collecting on its debt.

[bbgrunt]

36. "But officials tonight insisted that its cost to the Social Security trust fund will be

reimbursed with a credit from general revenue." sure thing, that. hahahahahaha.

[jtown1123]

71. If SS has to dip into general revenue, then we lose our strongest argument

that Social Security is self sustaining and does not add to the deficit. Once we lose this, Social Security is ripe for the cuts.

[westerebus]

6. Thank you for the info-mericial.

As my dear sainted grandmother would say: Don't be confusing me with the facts, my mind's made up.

[laconicsax]

8. It makes perfect sense!

Social Security is funded by a payroll tax so obviously, cutting that tax will have no impact on funding!

:eyes:

[Statistical]

10. It won't. Hint: why is the payroll tax going to "cost" $120B (i.e. raise deficit by $120)?

Think about it.

[laconicsax]

19. Answer: Because $120 billion will be needed to compensate for the reduced funding.

Really Statistical, think about it.

If cutting the Social Security portion of FICA won't affect Social Security funding, why does $120 billion need to be moved to SS from general revenue?

Your OP is technically correct: it won't cut funding by a single penny, it'll cut funding by 12 trillion pennies. Your reasoning however, leaves much to be desired.

[BzaDem]

20. It won't affect SS funding BECAUSE 120 billion will be moved from general revenue to the trust fund.

[lumberjack_jeff]

26. And we have a scouts-honor promise to back up that one. n/t

[Statistical]

46. No we have Obama who hopefully is smart enough to not sign a compromise bill missing the compromise.

I mean I think Obama can read. So if the bill gets to his desk he can always not sign it.

If the bill funds SSA $120B from general fund in lieu of 2% via worker payroll there is no way to change that AFTER Obama signs it without passing another bill and having Obama sign that (which once again I would hope he wouldn't fall for).

[Liberalynn]

62. "No We have Obama"

that's your only reassurance? Oh yes, that makes it all better. Its like he has showed such spine and a willingness to keep his promises and the intelligence not to enter into bad comprises so far? And as we know according to Obama, his new soulmate the Boner, always keeps his word too? :sarcasm:

[laconicsax]

28. And the Republicans will sign off on that budget item without hesitation!

Because if there's one thing they stand for, it's ensuring Social Security's solvency.

[BzaDem]

29. It will be in the bill. Republicans won't be able to amend it out. n/t

[laconicsax]

34. Right, because once a bill is introduced, it's an unalterable document.

[BzaDem]

38. It is, without 60 votes to alter it and unanimous consent to bring the amendment to the floor. n/t

[laconicsax]

70. Our legislature is bicameral. n/t

[Statistical]

35. They don't have a choice it will become mandatory spending.

The bill is a spending bill. It won't require approval in the omnibus spending bill (budget bill). It will already be allocated spending. When the bill is signed into law the treasury will update its projections on cashflows and if (well pretty much a certainty) the Treasury projections show that the govt has insufficient funds it will issue new bonds to cover the necessary obligations.

[Statistical]

22. What do you call the $120B moved from general fund to SS? I would call that "funding"

thus

2% payroll reduction = -$120B (negative $120 bil)
transfer from general gund = +$120B

Net - net no change in funding. SS end of year balance will be no higher or lower than if the 2% holiday hadn't occured.

[laconicsax]

27. You have five apples, I take two away. Sue agrees to give you two sometime in the future

How may apples do you have?

[BzaDem]

31. It's not sometime in the future. More like 2 are taken away, and 2 are added simultaneously. n/t

[Statistical]

33. false analogy.

There is no CASH in SSA trust fund. There are merely bonds.

Thus $120B in payroll contributions becomes $120B in treasury bonds.*
General fund contributing $120B becomea $120B in treasury bonds.

To use your analogy:

Your normally get an IOU from sue for 2 apples a year. Now you get an IOU from me for 2 apples a year. Has anything changed?

* Technically only the portion beyond current year liabilities is converted into treasuries however 2% is only a small portion (about 16% of current year funding).

[laconicsax]

37. Point taken. n/t

[silverweb]

11. This needs to be made more clear.

I'm aware that Federal Witholding Tax (FIT) and Social Security/Medicare withheld (FICA) are two different things. Does the 2% affect all withholding taxes across the board or is it just for the FIT?

[BzaDem]

13. You stole my line!

Just kidding. :hug: K&R for truth.

[Statistical]

15. I may have stolen it from you. I saw variants of it being ignored in multiple threads.

[neverforget]

23. Less is more!

[Statistical]

24. No but equal is equal. $120B from 2% payroll tax = $120B from general fund. n/t

[neverforget]

39. I asked for a link above to back up your claim. Would appreciate it

[Statistical]

40. I provided you a link and your responded to it. n/t

[neverforget]

41. So robbing Peter to pay Paul is good?

[Statistical]

43. That wasn't my claim.

Paying for SS from general fund is certainly no worse than paying it via payroll taxes furthermore the doom and gloom that it will make SS insolvent is totally unfounded. That was my only claim.

[neverforget]

45. So who is going to pay back the general fund? Do you realize the Republicans

are now going to to pivot onto the debt/deficit and debt ceiling? That's their next hostage and we just gave them another $120 billion to cut from the general fund. Nice deal.

[Statistical]

47. LOL. Republicans love to spend money. Hell they deficit spend more than Democrats.

No vote for raising debt ceiling has ever failed to get less than 95%+ support (with few wingnuts on both sides voting against it).

The idea that Republicans who have spent like drunken sailors for 60+ years are going to overnight come down hard and fast on deficits is silly. Anyways the point is somewhat moot. The debt ceiling is $1.8 trillion over current debt level hopefully don't need to raise that any time soon (at least a year or so). When we do hopefully we will see real cuts in DOD, Homeland Security, and State dept making the need to raise further debt a non-issue (a 33% cut in DOD, state, and Homeland security would balance the budget today).

[neverforget]

48. And the only time deficits matter to Republicans are when Democrats are in control.

Of course they're hypocrites. You'll get no argument from me on that. But remember the 90's and how Clinton shrunk the welfare state because of Gingrich and the Republicans? Well those Republicans were more reasonable than this group of right wing assholes.

[Statistical]

49. True the Republicans will be a bunch of asses but I think (maybe wrong)

they along with 90%+ Democrats in office too are utterly and completely addicted to spending money they don't have. Maybe they will turn over a leaf and make "fiscal conservatism" more than an empty slogan but I will believe it when I see it.

Still they don't have the votes to cut SS to balance the budget and they certainly don't have the votes to override a veto. All I am saying in this thread is the claims that this 2% cut in payroll (offset 100% by funding from general fund) is the deathknell to SSA is kinda sad joke. I mean it is just as pie in the sky as freeper conspiracies about FEMA death camps and makes people spouting it off seem just as informed.

[jtown1123]

72. This is not a sad joke, this is a serious threat. Republican strategists have always

wanted to use this method to undermine the program. See the section on Peter Ferrara below:

Bruce Bartlett, a former top advisor for Presidents Reagan and George H.W. Bush recently wrote, "What are the odds that Republicans will ever allow this one-year tax holiday to expire? They wrote the Bush tax cuts with explicit expiration dates and then when it came time for the law they wrote to take effect exactly as they wrote it, they said any failure to extend them permanently would constitute the biggest tax increase in history … If allowing the Bush tax cuts to expire is the biggest tax increase in history, one that Republicans claim would decimate a still-fragile economy, then surely expiration of a payroll tax holiday would also constitute a massive tax increase on the working people of America … Republicans would prefer to destroy Social Security's finances or permanently fund it with general revenues than allow a once-suspended payroll tax to be reimposed. Arch Social Security hater Peter Ferrara once told me that funding it with general revenues was part of his plan to destroy it by converting Social Security into a welfare program, rather than an earned benefit. He was right."

Even if they actually do pay for this from the general revenue, Social Security is much easier to dismantly because it is no longer self sustaining, which is what Republicans want. It's pretty disengenuous to compare this concern to death panels and other mumbo jumbo. People who share these concerns are SS experts i.e. Eric Kingson, Nancy Altman, etc.

[RaleighNCDUer]

55. Thing is, SS is meant to be OUTSIDE the general fund.

SS is self-funded. No general revenue is to be paid into SS, or to cover SS benefits. That's the way the law reads, at least.

This blurring of the line between FICA and general revenue just makes it easier to attack SS down the road, on the excuse that it is ALL just general revenue after all. This is a set up for the destruction of SS.

[jtown1123]

61. Exactly. Thank you.

[Caretha]

68. Yep

there goes that "Lock Box". I just knew they would figure outta way to break in, but who knew it would be the Dems who thunk it up? :shrug:

[inna]

52. pathetic. fail.

[Statistical]

53. Truth. $120 from general fund = $120B from payroll taxes. n/t

[inna]

54. yeah. and the whole idea is to "starve the beast", according to the well-known plan.

shame on anyone who supports this monstrosity.


:puke:

[Statistical]

56. How is paying the exact amount from general fund that would be paid by workers "starving the beast"?

$120B from workers paychecks -> SSA
$120B from general fund -> SSA

net net SSA gained $120B. Not once cent change in funding. Hardly "starving the beast".

In 2012 there are two options:
a) continue to partially fund SSA via general fund - $120B (or whatever amount is for 2012)
b) allow bill to lapse and payroll contributions fund SSA - $120B

[jtown1123]

67. Yes. In a few years there will be a funding "crisis" and they will cut benefits

to make up for this huge hit in Social Security's finances. This is an issue we need to be united on. Social Security is constantly under assault because it is one of our greatest achievements as a political party. We cannot allow spineless Democrats to hand this over to the Republicans.

[Romulox]

58. I'm fairly sure the OP argues that SS isn't in any trouble, either--so a grain of salt is required..

The OP's argument proceeds thusly: "The US just can't default on the IOUs in the trust fund!"

[jtown1123]

59. This is a FALSE statement. Social Security relies on its own funding source to stay solvent.

Taking away its main source of revenue will require it to rely on general federal funds for the first time in history, therefore weakening the program. This payroll tax cut is straight out of the Republican playbook to de fund Social Security making it ripe for cuts, means testing, and an overhaul that will turn it into a shell of its former self.

Some articles to back this up:

http://www.ncpssm.org/entitledtoknow/?p=1415

http://www.cbpp.org/cms/index.cfm?fa=view&id=2264

http://www.huffingtonpost.com/nancy-altman/the-end-of-social-securit_b_793366.html

[Caretha]

69. Thank you

Why do some people think we are so dumb and will fall for their shell game?

[ddeclue]

60. By definition of the word "reduction" it HAS to.

[bushisanidiot]

63. Those who've made a hobby of blaming the President for everything, won't listen.

fingers in their ears will block any reasoning attempts made.

[LeFleur1]

64. We Are Borrowing Because We Do Not Have Enough Money

There is no general fund unless we borrow more.

They've been stealing from the SS fund for years. What makes anyone think they'll pay it back now? With what? Chinese Money? Money from the Saudis? Where will they get the money since the rich aren't going to pay what they should be paying?

The SS fund was set up as a separate entity. They just couldn't keep their hands off the money.

[jtown1123]

66. This goes way beyong Dems disagreeing about Obama. This Payroll Holiday is very harmful

and should be dropped from this tax cut package deal. We need to move beyond Obama supporters vs. Obama critics and recognize that this measure is a huge blow to maintaining probably the best Democratic achievement.

[galileoreloaded]

65. Correct. Money is fungible. it is ALL General Fund.

Our accounts became co-mingled years ago.

Can't put the toothpaste back in the tube :)