Remapping Debate offered another theme the follow-the-pack crowd has yet to scratch very deeply. It discussed other policy measures that could be used to stimulate the economy, like dusting off the “making work pay tax credit” targeted at working class families, or extending unemployment benefits. A policy analyst at the Economic Policy Institute told why these ideas were not on the table. Washington was talking only about payroll tax cuts, he said, because “Republicans generally support tax cuts. If we were really talking about the best way to stimulate the economy, we would be talking about infrastructure spending and public works projects.” In other words, the Republicans have framed the agenda—a good angle for press exploration.
Instead of following the pack on this one, it would be good if the press did some old-fashioned explanatory journalism and laid out the implications of the tax holiday, both for now and in the future. A new United Technologies/National Journal Congressional Connection Poll shows that a majority of Americans support extending the payroll tax cut, despite concerns that extending the short-term reduction would increase the budget deficit. The support seems to be broad and bipartisan.
Even opponents of the tax holiday believe the cut will fly through Congress, since the
Democrats and Republicans, labor unions, and traditional supporters of Social Security think it’s a good idea. The public, especially those nearing Social Security age, need to know exactly what may be in store for them. What happens, as Blahous says, when the link between the payroll tax and the right to contributions is severed? What right will the public have to their benefits? What happens if Social Security morphs into something like health or auto insurance that won’t pay benefits if you stop paying the premiums? And then there’s the larger question: Are Americans being asked to spend their future right now?
Click here for more from Trudy Lieberman on Social Security and entitlement reform.
Excellent piece, thanks Trudy.
#1 Posted by Harris Meyer, CJR on Tue 6 Dec 2011 at 06:45 PM
Social Security benefits are ALWAYS funded with general tax revenues.
Every single dollar of the $2.5 trillion in the Social Security Trust Fund represents a dollar in benefits that will have to be paid from the general fund of the Treasury.
#2 Posted by padikiller, CJR on Tue 6 Dec 2011 at 07:46 PM
padikiller
you must be some kind of genius.
imagine the general fund having to pay back the money it borrowed from social security, the very idea!
next thing you know, the treasury will have to pay back all that other money they borrowed.
it gets so hard to tell stupidity from dishonesty anymore
#3 Posted by coberly, CJR on Wed 7 Dec 2011 at 05:32 PM
"Payroll tax" versus "income tax" is a distinction without a difference, with regard to the bottom line of the federal ledger.
Every single dollar collected in payroll taxes goes into the general fund of the treasury as soon as it is collected... And every single dollar paid in Social Security benefits is paid out of the general fund.
The money that is collected to "fund" Social Security is snatched by Congress and spent on a Canadian bus fleet for Obama and other "necessary" spending, while most of the money that is paid in benefits is borrowed from China and Japan, just like the money that is borrowed to cover the federal deficit, and then used to "redeem" the IOU's in the Trust Fund's file cabinet.
"Tax income is deposited on a daily basis and is invested in "special-issue" securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund."
http://www.ssa.gov/oact/progdata/fundFAQ.html#n4
It's nothing but a shell game.
#4 Posted by padikiller, CJR on Wed 7 Dec 2011 at 11:27 PM
Today each persons FICA tax goes straight to OASDI and is paid out to beneficiaries as Social Security checks, Disability checks, death benefits. The remaining taxes (and this will change by 2035 unless changes to Social Security are made) go into Treasury bonds (the trust fund) which is in the General Fund. Treasury bonds are bought by foreign countries, CEOs, you, me. They are backed by the US Government. If they weren't, China would own us (wait, they do already). The US Government can and does use the General Funds to pay for its operations. But the US Government has to pay Social Security back. So we are OK until about 2035. However, with this payroll tax (FICA) cut, Social Security will be underfunded and more money to pay beneficiaries will come out of the General Fund This is what makes some people in the know think will be the demise of Social Security because if money comes from the General Fund, then it is not your FICA taxes paying for it and so there will be no mandate to continue Social Security. What do you think will happen?
#5 Posted by condon, CJR on Thu 8 Dec 2011 at 09:43 PM
condon wrote: "Today each persons FICA tax goes straight to OASDI and is paid out to beneficiaries as Social Security checks, Disability checks, death benefits"
padikiller responds: This is not true.
Employment taxes are transferred into the general fund of the treasury immediately and replaced with IOU's from Congress. When benefits are paid, these IOU's are redeemed with money paid from the general fund.
The truth bears repeating:
Every single dollar collected in payroll taxes goes into the general fund of the treasury as soon as it is collected... And every single dollar paid in Social Security benefits is paid out of the general fund.
#6 Posted by padikiller, CJR on Fri 9 Dec 2011 at 08:15 AM
Padkiller is dead wrong.about everything.
Every dollar collected via FICA or from the tax on benefits is required by the Social Security Amendments of 1939 to be credited to the Social Security Trust Funds which are operationally and legally separate from the General Fund. Something fully documented by the Analytical Perspectives on the Budget, the explanatory document that accompanies the Presidents's Budget each year. Or via the Trust Fund Monthly Reports published by Treasury. The 'General Fund' has a specific legal and operational definition and it just isn't true that the funds are ever intermingled. Lazy, very lazy.
Two there is no requirement that the $2.6 tn Trust Fund balannce EVER gets paid out. In fact if Social Security ever obtains the official state known as "Sustainable Solvency", something that could be accomplished by minor tweaks on the revenue side (per the wild eyed crazies who score such things for CBO) all such principle would have to b retained as well as most of the debt service in order to maintain a 'Trust Fund Ratio' at its mandated minimum of 100.
Yes it is odd that Trust Fund assets are as real as real and yet ideally never need to be redeemed, in fact any such redemption would be a sign of profound failure of Solvency as defined by the SSA Officeof the Chief Actuary, yet if one takes the time to study the numbers that is the forced conclusion.
Padkiller's line of argumentation is facile and even plausible. Still it is legally and operationally dead wrong and a cautionary tale about the dangers of too little information. Oh and BTW about hubris.
#7 Posted by Bruce Webb, CJR on Tue 20 Dec 2011 at 10:38 AM
Geek alert. If numbers make your eyes glaze over just skip this.
The Social Security Trustees are mandated to target 'Short Term Actuarial Balance' while also keeping an eye on 'LongTerm Acturial Balance' in each case 'Acturarial Balance' is defined as projecting year end Trust Fund balances for every year in the projection period at 100% of next year cost. In this context 'Short Term'is defined as ten years and long term as 75 years. Currently the combined Trust Fund (there are two) have a Trust Fund Ratio of just over 350. On the other hand projected Cost goes up every year and it turns out arithmetically that putting Social Security on a smooth glide path to Sustainable Solvency while gradually reducing the RATIO towards 100 never requires reducing the BALANCE below its current level and in fact requires its augmentation in nominal terms.
Yes Trust Fund Assets are real and as such require a certain level of debt service from the General Fund. But oddly never actually need to be redeemed. Not if we fix Social Security as it generally has been in the past-by small tweaks to FICA rates. But you have to do the math. Or at least glance at the data tables.
#8 Posted by Bruce Webb, CJR on Tue 20 Dec 2011 at 10:59 AM