We all know this is going to be the way it goes down. There will be a one year extension next year, since the political season’ll be heating up, and then another, and another, maybe longer one. One way or the other, the FICA tax cut will be permanent. Then comes the SS and Medicare “crisis” that this will create. Republicans will say that since neither is solvent any longer, benefits will have to be cut, the age of SS will have to go up, less will have to be paid out. This is, of course, right as the Baby Boomers are retiring, making it even more dire.
There’s an easy answer to this of course. Make the FICA tax cut permanent, but raise the ceiling of wages that FICA affects to $200K, or $250K. But this will not happen, because it should have happened several times already, and Democrats are effing wusses and can’t get it done, even with big majorities in Congress and the White House.
So, kiss your retirement plans goodbye, my friends. Forget about having quality health care in your later years and certainly, don’t rely on Democrats to save your ass, either.
FDL has a great quote from FDR (bold mine):
<
p>
<
p>As the FDL’s author said:
Not only did he create the Simpson/Bowles commission to attack it, he’s now parroting the far-Right bald-faced lie that Social Security was not originally intended for retirees.
<
p>It’s a sickness with him.
Please read the excellent mini-essay by Nancy Altman of Social Security Works, “The End of Social Security.” It’s at HuffPost and lots of other places.
This is one of the worst parts of the very bad deal that the President has “negotiated” with the Republicans.
SS is effective precisely because everyone benefits to the extent that they’ve contributed. Once it ceases to be independent of and separate from the Treasury it will be treated as any other federal program and become an easy target for the GOP. They’ve been awaiting this moment for generations.
The payroll tax holiday is one of the more progressive elements of this proposal. It is targeted squarely on the middle class, unlike several of the other parts of this tax deal. To the extent that tax cuts stimulate the economy, focusing them on people who will actually spend it is the best strategy.
<
p>The notion that payroll tax holiday is a war on Social Security is ludicrous. If Republicans want to cut Social Security in the future, than that’s the argument they’ll have to make. Let them claim that Social Security is in dire financial straits and needs to be cut. Anyone who does that is opening themselves up to a attack ads saying that so-and-so wants to gut your Social Security. Republicans can use proposed tax increases as a rhetorical stick with the best of them, but Democrats can and have done the same, and very effectively so, in regards to proposed SS cuts.
<
p>I also cannot reconcile the anger from some liberals over this tax holiday with those same liberals’ support for the middle-class tax cut. If you think the payroll tax holiday will threaten Social Security in the long term, than why wouldn’t the middle class tax cut threaten a much broader array of government programs over the long term? After all, it would add trillions to the deficit over the next decade.
<
p>Can someone explain why the same logic used here against the payroll tax cut isn’t applied to the middle-class tax cut, which many liberals supported?
Since it erodes a very progressive program, SS (and Medicare, really, in the end) AND it’s not proportionally helping the poor and lower middle class – it proPORtionately helps people making more money! At least up to $106K/year.
<
p>A PROGRESSIVE tax cut would proportionately help the lower classes more than someone making $100K a year. Sorry, that’s the truth. We would be better off giving everyone $600 this year in a check (or over the course of the year) than giving someone making $15,000 a $300 break for the year, and a $100K/year person a $2100 break.
<
p>Nevermind the fact that this very move will be – not “may” but WILL – to undermine the most progressive piece of legislation ever made. That has been untouchable for 70+ years!
<
p>So I’m not buying what you’re selling.
when you say that this will not make SS vulnerable.
<
p>If this becomes permanent (or perpetually “temporary,” same diff), then quickly, projections of SS’s insolvency will be drastic and dire over the next decade. Instead of trying to make an insolvency argument over an SS program which is solvent for decades and 4/5s solvent after that, they’ll have the very ammunition of a very really insolvency and a line item in the regular budget that they can hack away at.
<
p>We have never in the history of this program cut the SS tax – and there’s a VERY good reason. Reread the quote from FDR please.
Do you support the middle class tax cut portions of the tax deal? THAT’s what I want to know. Because if you do support the middle-class tax cut, as many liberals do, than it completely contradicts everything you say in this diary.
<
p>If the payroll tax holiday is not progressive, than how is the middle class tax cut progressive? If the payroll tax holiday threatens Social Security, than why wouldn’t the far larger amount of money that the middle-class tax cut would cost threaten a far wider array of government programs?
But given that it’s a recession it’s probably more help than hurt, at least in the SHORT run. Problem is, this deal looks terrible for the long run. On many fronts.
<
p>In a better economy, I say let all the damn taxes go to Clinton-era levels. It seemed to work, it wasn’t onerous on me as a middle class person that I can remember, I can live with that in order to have first class education, fully funded public universities, etc etc ad nauseum.
First, I do not support the middle-class tax cut either.
<
p>I think extending unemployment is good public policy because it directly stimulates the economy (the CBO says about $1.50 in gain for every $1.00 in unemployment spending). The middle-class tax cut is about an even trade, according to most of the sources I’ve seen. The tax giveaway to high-income taxpayers is a disaster — it returns about $0.40 for every $1.00.
<
p>My problem with the payroll tax “holiday” (the scare quotes are because you know as well as I that it will never be removed) is that, as Lynne observes, it destroys the actuarial foundation of SS.
<
p>The entire purpose of separating SS from the general fund was to separate it from the annual bickering about funding.
<
p>The payroll tax holiday must be blocked.
Get them used to paying less in the short term… long term, Social Security takes a shallacking.
<
p>Additionally, it’s widely been speculated that this will — in the short term and forever thereafter — decrease wages. Why on earth would you get a normal raise next year when the government just gave you one? That will be the reasoning of your boss. New hirees will start with 2% less. Then, if the tax cut for some reason doesn’t become permanent, do you expect all those companies to raise wages to offset that? Fat chance.
<
p>No, this is a bad deal — one that probably won’t help people very much in the short term, could depress wages in the long, and most certainly puts the very foundation of Social Security in jeopardy for the long. The biggest defense for social security we have is that it isn’t in any risk of defaulting for decades to come. This ‘proposal’ would obviously change that. Which is why the Republicans (and Obama, the wannabe Republican) LOVE it.
<
p>The philosophy of Republicans is to “starve the beast.” Spend to catastrophe now so we come to the point in the future that we can’t afford to spend anything at all. No GOP pols get hurt now, but they know they’re forcing their reckoning to come — and that reckoning is the final nail in the coffin of the New Deal.
<
p>Yes, I agree. But this is why liberal support for ANY tax cuts is perplexing. I don’t know your position on the middle-class tax cut provisions of this deal, but clearly the trillions it would cost threaten government programs in the future — including Social Security and Medicare. This is why I’m not sure why it’s in progressives’ best interests to support any tax cuts at all.
We should not be cutting taxes at all. Nor should we be cutting government programs directed at the poor and middle-class. The freeze on federal wages exemplifies silly posturing that actively hurts future growth and accomplishes absolutely nothing.
<
p>The only way to meaningfully reduce federal deficits is to grow the economy. The yardstick that should be applied, therefore, is the effectiveness of a particular proposal in accomplishing that.
<
p>Extending unemployment insurance grows the economy. The other aspects of this package do not. The best way to grow the economy is to get more wealth into circulation. This, in turn, means to move it back into the hands of the 99% of us from which it has been stolen in the last three decades.
<
p>The US economy generates plenty of wealth. The catastrophe is its excessive concentration in the very top of the US wealth distribution.
We are called progressives for a reason. We believe in change. In implementing technical reforms which improve the quality of government and society at large. We believe in the power of reason and facts to make the world a better place, not just through government but through truth winning out in the end. It is a betrayal of everything good and everything progressives should stand for to formulate policies based on the optics of how it may play out in the future. On policy merits, this is a good idea. It does not seriously harm Social Security’s solvency, and it gives us significant stimulus. That this could potentially be used as an excuse to cut Social Security in the future is irrelevant. Lots of things can be used as excuses. We should focus on the facts and deal with the bullshit when it comes.
<
p>This is the sort of madness and nihilism that a lot of us let ourselves fall into in 2004. If only we were those dastardly Republicans we’d be able to win. But no: we won because we were right, because the economy tanked, and because the voters eventually get tired of a pointless war. Focus on good policy and the rest will follow.
<
p>For all this talk about Obama being a wimp, you’re being wimps! You’re resisting change not because it’s bad on the merits but because you fear what could potentially happen in the future. This is far more pernicious than surrendering to Republicans on some weak tea compromises. This is abandoning reality and just focusing on optics. There has to be at least party in this country which cares about actually making the world a better place, not about whether it wins or loses. Karl Rove is not a role model.
That there is no such thing as “temporary taxcuts” or sunset provisions, AND that this “progressive” proposal is really just a long term erosion of a 70-year program largely untouchable BECAUSE it was separated out from the general budget as a trust fund and separate revenue stream.
<
p>Which is why the Republicans are allowing it in their so-called compromise!
<
p>GodDAMNitall, there are better ways to progressively help the poor and middle class than this!!
as an excuse to cut Social Security in the future is irrelevant.”
<
p>What?!
<
p>That’s crazy talk. The GOP have been gunning for SS for decades, and this is exactly the chance they’ve wanted to get. Now they can really, legitimately say we can’t afford the program…. or they get to run against us “raising” social security taxes if we don’t let this become permanent, which would be a crushing blow to our party. Either way they win.
FDR said what he did? He fully understood that the program would not be sustained if it was made vulnerable to charges that we couldn’t afford it. The genius was in insulating it from the general funds.
If this provision is passed and the SS trust fund is raided, even for something as good as stimulating the economy or helping the working poor, it will signal the end of the strongest argument in its defense.
You’re the one who’s not living in reality by ignoring the 70 year history of the plan and the equally long efforts by it’s opponents to undermine it. Don’t think for a moment that they’re not celebrating this coup — orchestrated by a DEMOCRATIC president!
First off, as far as I can tell no money is being taken out of the Social Security trust fund. The money which is being lost in FICA is being transferred into the trust fund out of the general fund. That doesn’t entirely address your larger point, but it’s something that needs to be said.
<
p>To address your larger point, it’s really misleading to attribute tactical genius to FDR. He implemented a lot of things which have been rolled back. Social Security has stayed around because it is popular, and it is popular because it is legitimately a good program which a large segment of the population benefits from.
<
p>The idea of separately funding Social Security was implemented not to make it into some sort of unkillable program, it was made so the damned thing could pass in the first place. The Social Security Act was one of the later bills of New Deal legislation, and the bill had some serious opposition. Phrasing it as a quasi-insurance program makes it a lot easier to sell to people as not being some socialist scheme. But lots of countries have socialized pensions of various kinds, and there are many different ways they’re structured.
Because we never had a president who called the money the gov’t owed to the SS Trust Fund as just “pieces of papers” and “useless IOUs.” With the threat of not bothering to pay them back.
<
p>General fund line items are VULNERABLE. If we pull 30-40% of SS payments from the general fund, the TRUST FUND will be vulnerable. After 70 years of not being vulnerable, not just because it was popular, but also because it was completely PAYGO – ie, a separate fund that was perpetually projected to be solvent – now, it will not be. It will be projected to be insolvent, without funds from the general revenues.
<
p>It’s basic math and facts, here. The Republicans are on the RECORD as saying this will be their tactic. Come on, wake up! They were happy to use this “insolvency” tactic when facts were not on their side, they will gladly use it even MORE when the CBO starts announcing that the SS Trust Fund is insolvent in less than a decade under the new tax regime.
<
p>You do get that NO ONE has ever, ever ever ever, cut the payroll taxes before, right? That this is unprecedented in the history of the program?
<
p>Oh, but that must be meaningless. ~rolls eyes~
I admit that if the FICA tax cut is made permanent, that might be suboptimal. But I suppose I just don’t see how you see that to be such a foregone conclusion. Most of the stimulus is going to expire, in fact a big motivation for this deal is that the Making Work Pay tax credit is expiring and this is in a sense its replacement. The Bush tax cuts themselves are of course an example of something that didn’t expire, but the Bush tax cuts were “temporary” only because ten years is the maximum you can implement under reconciliation. It was always flagrantly quasi-permanent. But this, to contrast, is a pretty self-consciously short term tax holiday.
<
p>The Republicans will of course fight to preserve the taxes on the rich in 2012, but I don’t see them making much effort to preserve the FICA tax. Republicans don’t really care much about taxes on the middle class. And unlike income tax, FICA taxes have never actually been cut. But they have been raised many times: and by Republicans. By Ronald Reagan.
This would be a big tax increase in an election year and during a distressed economy. Who’s going to support that? The Democrats or the Republicans?
I don’t think you actually believe what you’re saying.
The claimed sunset provision of the Bush tax cuts was how the GOP persuaded gullible Democrats to go along with it a decade ago. How can you not see that this “temporary” reduction is the same thing?
<
p>The GOP hasn’t cut FICA taxes for years because they’ve been afraid to.
<
p>President Obama just cut the power to the “third rail” of Social Security.
Most Democrats voted against the Bush tax cuts. Some Democrats voted for them, but their votes were only really necessary in the Senate, and when you’re talking about people like Ben Nelson, these aren’t naive liberals who were taken in by the Bush administration’s slick agenda, these are people who sincerely share the Republicans’ desire to give rich people tax cuts. See House roll call and Senate roll call.
<
p>FICA just doesn’t have the same optics. Not because Social Security’s third railosity is some magical beacon protecting it from cuts, but because it’s a quasi-flat tax that is automatically deducted from people’s paychecks so it doesn’t have the visibility. The anti-tax movement has made the 1040 public enemy number one. And again, Republicans don’t really care about taxes that are mostly born by the middle class.
<
p>And to address Marc Davidson’s point (I don’t want to make two posts because these kinda overlap) if the economy is truly distressed in 2012 another few years won’t kill Social Security. But unless there’s a genuine desire from Democratic side of the aisle to preserve the stimulus side of things, Republicans will focus all of their attention on the income tax. I genuinely don’t understand why so many liberals seem to think that Republicans are these diabolical masterminds where if you give them an inch they’ll rape your family.
if you give them an inch, they’ll rape your family.
<
p>You do understand that they are holding START hostage, don’t you? You know, the treaty that gives us the ability to monitor Russian handling of their nuclear arsenal (and they ours).
<
p>I call denying unemployment compensation to millions of Americans who lost their jobs from THEIR POLICIES “raping” American families.
I was talking more about their tactical prowess rather than their malice. Yeah, Republicans suck, but when they decided to oppose the new START treaty, that’s not because of a complex plan coming into fruition, that’s because it’s up for a vote and they’ve mostly decided they’re against it for stupid but sincere kneejerk hawkishness.
<
p>The last thirty years have had some rather serious Republican victories, to be sure. But I think it’s wrong to think this is the case because they’re just so brilliant. A lot of this is just because our political system has a lot of flaws which play into the Republicans hands and that they had a few lucky breaks here or there. There are a few genuinely talented tacticians on the Republican side to be sure, but tactics can only take you saw far.
I think we Democrats tend to play too nice.
<
p>We have a hard time admitting that the other side doesn’t care about truth, facts, rational argument, or integrity. Like the religious mindset that they pander to, in the GOP world-view the end justifies the means. They truly believe they are doing “God’s will”, and that belief excuses all.
<
p>My late father, in reluctantly describing his WWII combat experience in the Pacific theater, said that the hardest aspect of shooting a young Japanese soldier was admitting to himself that his adversary was going to shoot him. He simply couldn’t believe it.
<
p>We Democrats need to admit that the GOP is shooting us. They really are.
If the arrangement of Social Security has helped keep Social Security alive (and it probably hasn’t hurt) I’ll admit that’s a good thing. But it’s come with very real costs. The quasi-insurance nature of the program makes it harder to focus money on those who need it. I’m not particularly in favor of means-testing Social Security (even aside from political considerations, I like universality on policy grounds alone: it keeps implementation simple and phase-outs can have perverse incentives) but there’s something counterproductive about the fact that the less money you made while you were working, the less in benefits you’ll get. (The percentage of your previous income varies so there’s something of a redistributive effect, but still.)
<
p>But many liberals would be afraid to shift the benefit structure so that the poorer would benefit because they don’t want to mess with its “tactical brilliance.” Which is fine to an extent, I’m all for keeping change careful and incremental, but we should be willing to look at every government program and think about how we can make it better, and Social Security is one of the biggest government programs there is.
“The quasi-insurance nature of the program makes it harder to focus money on those who need it.”
<
p>Um, sadly, no.
<
p>SS isn’t insurance. It’s a pension plan – one that workers are paying into and retirees draw from, and is fully funded and paid for on a year to year basis (or would be, until they cut FICA, and raise the cap on FICA-affected wages to move with inflation). It’s guaranteed, because there will always be workers paying FICA. Sometimes there is a boom group of retirees vs workers, like now, so there’s a little more draw to the system, which you can easily compensate for, but it is NOT any sort of insurance plan. It’s pay-in, pay-out one for one.
<
p>Any attempt to portray otherwise is a lie and a fraud.