Peace, Love, and Rock-n-Roll from a proud Lefty, Liberal, Socialist Hippie

Friday, February 17, 2012

The beginning of the End?

Today, in a rare show of bipartisan action, the US Congress passed President Obama’s so called Payroll Tax Holiday for 2012. The “holiday” will keep Social Security withholding at just over 4% as opposed to the just over 6% for American workers; saving the average worker between $20 and $40 per paycheck. In December, the Republicans in Congress allowed for a two month extension of this particular tax gimmick and I wrote here and at the Examiner at that time:

“So here are my issues with this scheme. First, the very fact that we are even discussing anything to do with Social Security at a time when the Republicans (and some Democrats) seem more than willing to “review” or “modify” the program as part of the discussion of deficit reduction, should make everyone nervous. Second, as we discovered last night, there is no way this Republican Party is going to ask their millionaires to reimburse a raid into the Social Security Trust Fund. Third; but perhaps most importantly, for the past few years, we Progressives have been able to rebut Tea Party and Republican rhetoric about Social Security contributing to the national debt by insisting that the program is run from an independent fund (hence the separate deduction on your paycheck and the whole basis for the Payroll Tax Holiday) and does not impact the General Fund. With this scheme (dressed up as a blessing on working people), Obama and congressional Democrats are handing the right-wing the argument they want to validate their desire to eliminate the program (or severely cripple it) as being a drain on the General Fund.
 I ask again; why would any Progressive American support this scheme?”

Of course, at that time, the only voice to be heard from the left was Vermont’s Independent Senator, Bernie Sanders who voted against the December bill. Sanders said at the time, My concern is diverting hundreds of billions of dollars from the Social Security trust fund into that immediate tax relief, so I would love to see tax relief, but done in a different way."

And then, in January, I received a response from Congressman Rick Larsen (D-WA02) which I published at the Examiner:

“You and I are on the same progressive page. A payroll tax cut that undermines Social Security in untenable. It is easier to support the most recent payroll tax cut because it does not harm the Social Security Trust Fund. President Obama and Democrats ensured that the lost revenues are made up for in general tax revenue so the Social Security Trust Fund is not hurt.”

I said at that time that apparently Rep. Larsen and I don’t quite agree on what might harm Social Security. And then, today, the Huffington Post reported this:

Sen. Tom Harkin slammed his own president and party for hatching the payroll tax cut deal that is expected to pass Congress Friday, saying he's "embarrassed" the Democrats are pushing a measure that begins the "unravelling of Social Security."
From the floor of the US Senate on Thursday evening, Harkin (D-Iowa) said this:
"This Congress will be making a grave mistake -- a grave mistake -- and reinforcing a dangerous precedent," Harkin said in a dramatic Senate floor speech late Thursday. "And I’m dismayed that Democrats, including a Democratic president and a Democratic vice president, have proposed this, and are willing to sign off on a deal that could begin the unraveling of Social Security.”
Arguing that Social Security; funded via a separate withholding tax, had never contributed one dime to the federal deficit, he added, “With this bill, we can no longer say that. We can no longer say that Social Security doesn't contribute to the deficit." And, going beyond simple criticism of the tax scheme, Harkin added this warning to the Democrats who promoted and voted for this potential assault in Social Security:
This, I believe has been the hallmark and the underpinning of the party that I've been proud to belong to. Cutting the payroll tax is a bad idea, terrible idea. I'm embarrassed that it's being proposed by a Democratic president and a Democratic vice president."
Thank you Senator Harkin. I was beginning to believe that there were no rational thinkers left in the Democratic Party.

Chad (The Left) Shue


Robert said...


What is different about this cut that it affects the deficit, if others do/have not?

Chad Shue said...

In fact there are two issues here. First we deal with where this reduction in withholding is coming from. The Payroll Tax goes directly to the Social Security Trust Fund. In order to not reduce the amount of money remaining in the fund, the money is being reimbursed from the General Fund in the form of an IOU. President Obama had requested that the General Fund be reimbursed by increasing the personal tax rate on high income (over $1 Million) tax payers. That was not approved, therefore the General Fund will not be reimbursed, thus adding to the deficit.

This leads to the 2nd issue which is, if Social Security now "officially" is part of the deficit, it becomes a bargaining chip on the cutting block. As Tom Harkin and I have said; Democrats have lost the integrity of the point when we say that Social Security does not and has not contributed to the deficit by virtue of the fact it has a dedicated funding stream outside the General Fund. Even though the Trust Fund is owed millions of dollars from the General Fund already, those IOUs were based on monies stolen by previous presidents to pay for things like wars and stuff. In this case, Obama is actually decreasing the funding stream to the SS Fund and, thus, jeapordizing Social Security directly.

Chad (The Left) Shue