People are getting Alarmed about the Social Security Payroll Tax Holiday Provision. Obama is Silent.

[jtown1123]

Live From the Left Coast
The "Tax Compromise" and Social Security
Posted December 9, 2010 - 10:36 by Angie


Obama and Biden have made a grave political error by putting the Social Security tax holiday idea onto the table and allowing it to be incorporated into the package with the Bush Tax Cut extensions. In terms of fiscal policy there is a good argument for this temporary 2% cut in the Social Security contribution from 6.2 to 4.2%. It is mildly progressive in that it increases the take home pay on the first $108,000.00 of income. Its benefit is thus limited for people with very high wage levels. So as a Keynsian stimulus measure the idea has its merits.

But for the Democrats, and the Obama Administration in particular, this looks to me like a slippery slope toward a place they REALLY don't want to be, dismantling Social Security. The argument is this, the Republicans have long found Social Security an anathema. One of the Bush 43 Admini-stration's goals was privatizing Social Security. Various Republicans have also talked about cutting or means testing the benefits. These ideas failed to get traction with the wider public. People like Social Security because it works. And, financially, it does work. It is fiscally efficient, it has very low overhead. Although Republicans like to talk about the "Social Security Crisis", the fact is that there isn't much of a problem (unlike Medicare which DOES have a future funding problem). Yes, if current trends continue there will be a funding shortfall some time in the decade of the 2040s, but that can easily be taken care of if, sometime in the next decade - sooner is better, we slightly increase retirement ages or slightly increase the contribution rate. However by taking this Social Security tax holiday the future of Social Security becomes less sanguine. And this is where the Democrats weakness at setting the political agenda is going to bite.

The scenario is this. After a year the economy is still weak and people have become used to their new take home income levels at the 4.2% rate. So one suspects that the holiday will be continued because, the Republicans will point out, it would be a TAX INCREASE to do otherwise. Democrats, as they are today with the Bush tax cuts, will be frightened of being labeled as the party of taxation. However when this lower social security tax rate is projected out onto the next couple of decades there really will be a Social Security Crisis. The obvious Republican response will be to hammer on this "fiscal irresponsibility" in order to advocate to have Social Security benefits cut, means-tested, or privatized.

There is no reason this has to happen, except that the Democrats show NO ability to control the political agenda. Two years from now in his attempt to get reelected and faced with accusations of Democratic fiscal irresponsibility I fear that Obama will be telling us that he must compromise with Repub-licans and the bond markets by supporting some sort of half assed Social Security privatization scheme. The starting point was this week when they accepted the Social Security tax holiday.

The full article: http://lftlc.com/blogs/angie/tax-compromise-and-social-security

[napi21]

1. I sent an email to the WHthis Am about this. Honestly 2% increase

in someone's paycheck isn't enough to make mmuch if any difference to anybody. Thiss was a really stupid move.

[jtown1123]

7. Maybe our best bet at this point is to pressure our Senators. I think Obama is already gone.

[sasha031]

13. yes, yes yes, I have contacted my congressman, he is against this

[reformist2]

19. We're going to need that filibuster to stop the Republicans (and Obama)

[no limit]

2. The reason Obama put this in there is that he wants to cut social security

it's the same reason that most of his deficit commission was filled with "fiscal conservatives".

[Dappleganger]

3. It's the foot in the door.

Trojan Horse.

[Spike from MN]

8. Yep. If they really wanted to give a small tax break on the first $106,800

of wages earned, they could just do another round of "Making Work Pay" and set it at 2% of gross pay. No need to muck with SS at all.

[Divernan]

4. Obama's hand-picked Deficit Commission chairman came up with this suggestion.

He was known to be critical of Social Security before Obama appointed him. Ergo Obama wants to gut social security so it can be privatized and make billions in fees for his corporate financial community handlers.

[Autumn]

5. He hasn't been silent. I heard yesterday

he was busy calling and e-mailing to get support for the tax package. Oh you mean silent on explaining the nasty little provision that he and the republicans agreed on. Yeah we will get crickets on that one.

[reformist2]

6. EXACTLY. Leave SS Alone!

[gratuitous]

9. Where did this idea come from, anyway?

It's pretty obvious what's going to happen if this so-called payroll tax holiday is adopted, and this article hits most of it in terms of the predictable yammering about a tax increase when the holiday is set to be over with. The other prong of why this is such a bad idea, is that it will make social security appear to be less solvent. If you think the tiresome concern about social security "going broke" in 28 years is annoying, just wait until the actuarial tables make it look like that's going to happen in 23, or 20 years. The screams of ersatz concern will drive you barking mad.

But how did this idea get promulgated in the first place? Or was this one of those infamous "self-writing" clauses that nobody wrote, nobody can remember how it got proposed, and son of a gun if there's nothing that can be done to remove it.

[corpseratemedia]

11. +1

i wish there was a presidential recall, what a nasty little poison pill this "tax bill" is really about

you explained how it's going to go down very well!! sickening..

[sasha031]

14. never was a progressive idea

" The payroll tax holiday was never a progressive idea. It is rather weak stimulus and could work to undermine the program. The idea was advocated by the conservative American Enterprise Institute and Michael Boskin, a senior fellow at the Hoover Institution. The Republican Governor of Indiana, Mitch Daniels was, only two months ago, promoting a temporary, one-year “payroll tax holiday” in a Wall Street Journal op-ed. Even Mitch McConnell came out in support of a temporary payroll tax cut as an alternative to the stimulus bill in 2009."

[inna]

16. read this and weep:

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

[reformist2]

23. Mitch McConnell proposed this two years ago?! Wow.

[inna]

25. I know. That's what I said when I first saw it, "wow". nt

[jtown1123]

21. It's a Republican idea. Daily Kos had an article today where

Summers: Payroll tax holiday was GOP's preference for tax stimulus
by Jed Lewison
Thu Dec 09, 2010 at 08:30:03 AM PST
Larry Summers during a Wednesday afternoon gaggle with reporters:

Q So the only reason that the payroll tax holiday will provide more stimulus is because it’s twice as large. Making Work Pay was capped. Why didn’t you preserve Making Work Pay? Is it because, as the President said some months ago, it’s just a kind of invisible tax cut and didn’t provide any political benefit for the White House?

MR. SUMMERS: No, it came out of the process of compromise with the Republicans who were more attracted to the payroll tax holiday concept, and that was a proposal that, as had been coming out of here, we had been giving considerable thought to in the context of the President’s budget.

So now that we know that it was the GOP's preference for a payroll tax holiday over extending Making Work Pay, what are Republicans saying about the proposal? HuffPost's Ryan Grim reports:

"Once something like this goes into place, a year from now, when it expires, it'll be portrayed as a tax increase," said Sen. Bob Corker (R-Tenn.). So in a body like Congress, precedents matter and this is setting a precedent. I think that certainly is going to create some problems down the road if it passes."

Given that Congress, under Democratic control, can't gather itself to let tax cuts for the wealthiest Americans expire, members of both parties are convinced that letting the payroll tax rate revert back to its current spot will be near impossible.

"Once you bring a rate down, if it goes back up, people will feel that. They'll feel their paycheck being less and that argument" -- that letting it expire amounts to a tax hike -- "eventually is bound to be made," said Sen. Mike Johanns (R-Neb.).

"There's always a tendency to continue those things... Once something comes in, it's very difficult to change it," said Sen. George Voinovich (R-Ohio.) He then volunteered, without prompting, that "It would be detrimental to the Social Security system, especially when it's in bad shape."

HuffPost noted that some of his colleagues would likely treat the deprivation of Social Security funds as a benefit of such a circumstance rather than a drawback.

"I suspect so, yes," agreed Voinovich.

The rest: http://www.dailykos.com/storyonly/2010/12/9/927144/-Summers:-Payroll-tax-holiday-was-GOPs-preference-for-tax-stimulus

[inna]

24. did you see this?

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

[Poboy]

10. recommend

[sasha031]

12. sad thing is/ Obama Likely Could Have Gotten Stand-Alone Payroll Tax Holiday

I just posted this...


http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9735177

[ljm2002]

15. Sadly, I believe Obama really does want to go there...

...that's why he instituted the catfood commission in the first place, and put Simpson and Bowles there to head it up. That's why he negotiated this deal with the Republicans while not even talking to his own Democrats.

This deal actually raises taxes on the poorest earners! How about a Democratic president doing these things -- raising taxes on the poor while showering money on the rich, and setting the stage for dismantling Social Security.

[TBF]

20. Yes, he wants to go there - and this has long been on the DLC's list -

I did some research earlier in the week. Here ya go: http://journals.democraticunderground.com/TBF/26 (with links to the sources)

[glitch]

26. Thanks for that. nt

[NorthCarolina]

17. It's a poison pill, so 'silence' is key to passing it. nt

[rocktivity]

18. Why no talk about raising the salary cap?

Eliminating it altogether would allow EVERYONE to pay a LOWER rate.

:headbang:
rocktivity

[TBF]

22. Yes, ProSense (where is she anyway) - has been telling us for months

that Obama was interested in raising that cap. That made sense to me.