The most interesting thing to me has been the focus on the payroll tax cut: it has, among other things, given Ryan a nasty headache.
But what does it do, really? It cuts 2% off payroll taxes for a period of one year, which means that the Social Security System will be deprived of approximately $120 billion.
But, I am reliably informed by progressive Democrats that this $120 billion is the very life essence of the Social Security system, which will surely wither and die without it. This is a rather significant and abrupt change in the health of the Social Security system, which was in super-duper shape just weeks ago.
Then, the Simpson/Bowles commission pointed out that the Social Security system is nearly insolvent, and will soon fail to collect enough to pay current benefits. “Lies!” it was shouted; the Social Security Trust Fund exists to fund the shortfall and will keep the system solvent for decades. The fact that the Trust Fund lent all of the money to the government, which spent it, is no matter.
Fast forward to today: The “rock-solid,” solvent Trust Fund is to be deprived of $120 billion in cash receipts. But, that is not all. Instead of cash receipts, the Trust Fund will receive bonds in an amount equal to the payroll taxes not collected.
So: if there had been no payroll tax cut, the Social Security system would have collected the $120 billion, and used it to purchase $120 billion in federal debt instruments. Rock solid and solvent.
With the payroll tax cut, the Social Security system doesn’t collect the $120 billion, but gets $120 billion in federal debt instruments, which is precisely the position it would have been in anyway. Catastrophe!
All this does is demonstrate that the payroll tax actually does go into the general budget. Thus, at its essence, the payroll tax portion of the tax deal was an income tax break focused on the lower tax brackets, which I previously understood to be a Democratic party goal.
In addition to this tax break on the lower brackets, Obama received (i) a whole bunch of other, minor, “stimulus” items (Read the table of contents of the bill here); (ii) the repeal of DADT, which, if it didn’t happen right now, would not have happened in the next Congress, and likely would have been delayed for years; and (iii) ratification of the START treaty, which had dubious prospects at best in the next Senate.
In return for all this he gave up (i) a tax hike on the higher tax brackets; and (ii) an increase in the estate tax.
Oh, and as a side benefit: Had the tax cuts expired on December 31, everyone would have noticed that their first paycheck in January is a few hundred dollars light. How intense do you think the political pressure would have been to pass the extension then? Imagine our honorable Democratic Senators, filibustering the extension in order to ensure that the rich pay more taxes. Back in reality, the tax cuts would have been extended on Republican terms 30 seconds into the new Congress.
So, to review: Obama achieved a tax cut targeted at the lower income tax brackets, a moderate stimulus package, repeal of DADT, ratification of START. He gave up some tax provisions that were going to happen in about two weeks anyway. Oh, and by the way, he got a health care reform that has eluded Democrats for nearly nine decades.
Republicans got the extension that they would have gotten anyway, and lost the ability to CRUCIFY Congressional Democrats in January over the extension.
And for all this, Obama has been savaged by progressives. Vice President Palin would be preferable!
Progressives may like to think that they live in the reality based community, but they are pretty GD delusional all the same.