Payroll Taxes Are the Achilles Heel of Social Security

On August 8^th, Donald Trump took four executive actions on coronavirus relief. One was a memorandum deferring, to the end of the year, payment of the employee portion of the payroll tax for employees making less than $4000 biweekly. (Employer payments had already been deferred in the CARES act.)

He did this, according to the language of the memorandum, because “This modest, targeted action will put money directly in the pockets of American workers, and generate additional incentives for work and employment, right when the money is needed most.”

In an additional Trumpian flourish, he stated: “If victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax…I’m going to make them all permanent,” and: "If I win, I may extend and terminate… I'll extend it beyond the end of the year and terminate the tax."

To that effect, he included this language in the memorandum: “The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.”

The “payroll tax” is, of course, the FICA tax—part paid by the employer and part by the employee—that is earmarked for the Social Security and Medicare Trust Funds. The understanding is that Social Security and Medicare (SS&M) benefits are paid out from these funds. For FDR, that understanding “justified” SS&M in fiscally stringent terms that would make SS&M impervious to challenge from conservative politicians: “We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”

Critical Hour Discussion of Trump's Call for Payroll Tax Cut (4/8/2020)

The Bernie Train Stops, but Will the Senator Continue to Fight From Outside?

US Senator Bernie Sanders (I-VT) announced Wednesday that he is dropping out of the Democratic race for the White House, following weeks of pursuing an increasingly unlikely path to defeating the moderate front-runner for the nomination, former US Vice President Joe Biden, in a race now overcome by the COVID-19 coronavirus pandemic. What will be the impact of this on the race going forward? Also, will what took place in Wisconsin this week be the start of the 2020 election wars?

"President Donald Trump on Tuesday once again voiced his support for slashing the payroll tax — the primary funding mechanism for Social Security and Medicare — and said he would be calling for such a cut even if the US were not currently in the midst of a nationwide public health and economic emergency," Common Dreams reported Wednesday. Is this "code for gutting Social Security's dedicated funding," as progressive organization Social Security Works called it?
[Related articles: “Taxpayer Money” Threatens Medicare-for-All (And Every Other Social Program), Behind the Money Curtain: A Left Take on Taxes, Spending, and Modern Monetary Theory]

Bullshit2

Bullshit. Squared. It's a charade to get you to think you just HAVE to accept cuts in Social Security and Medicare. Every bit of it is a lie. The "sequester" will be better than the "Grand Bargain" Obama's been trying to make for three years. (See my previous posts on  January's "fiscal cliff" dive and the theft of Social Security .)

From Counterpunch

Watch Your Wallet!
Much Ado About Nothing in Budget Debate

by DAVE LINDORFF

"The Republicans are pretending that if we don’t have budget cuts this year, the whole US economy will collapse because of the nation’s enormous indebtedness.

"The Democrats are pretending that if no deal is reached, and automatic across-the-board cuts of 8% for the Pentagon and 5% for other programs will not only put the nation’s defense at risk and cause widespread suffering, but that it will derail the nation’s fragile economic 'recovery.'

"Both claims are, to put it gently, bullshit.
....

"As for the Obama Administration and the Democrats in Congress, what they secretly want is cover to start cutting Social Security and especially Medicare. Since those two programs were exempted from sequestration cuts, their strategy is to cry “wolf” about the impact of sequestration in order to bully Republicans into some kind of budget-cutting deal that would have Republicans agree to a rise in taxes in some truly minor way on the rich, while in return Democrats would 'grudgingly agree' to cuts in Medicare and maybe even Social Security. They will then be able to claim, to their progressive Democratic base, that the Republicans 'made us do it.'"

Read the full article 

Obama's Cliff Dive

The New Year's "fiscal cliff" deal represents another Obama "victory." For whom? As pointed out in Holland's article below, the Bush tax cuts had already expired when this deal was done. This means that, after allowing the FICA tax cut to expire for all working people, Obama made a deal to give new, permanent tax cuts to the wealthy, and paved the way for Social Security and Medicare to be put on the chopping block.  As I've said a number of times before (here, here, here), "the next Obama administration, claiming to be standing on the high ground of principle, will be, and will be proud to be, the first administration to cut Social Security.  Guaranteed.  And they’ll sell it as a 'save.' Obama and the Democratic Party really think it’s the right thing to do."  

Anyone who's waiting to see whether Obama and the Democrats will finally take a stand when the Republicans hold the country hostage to the debt ceiling is showing a truly delirious capacity to ignore what has been said, done, and established before their eyes repeatedly. Obama and the Democrats will make sure this gets done. With very few, if any, principled exceptions from the left, all Democrats who need to -- including Pelosi, Reid, and, yes, Bernie Sanders, all of whom voted for this mess --  will vote to save reform undermine Social Security and Medicare, because, well, they just have to.

Can it be said, with a straight face, that there is anything left of Democratic-party welfare-state American liberalism than an ever more vacuous nostalgia?

President Roosevelt signs the Social Security Act in 1935
Gone, baby, gone.

Some recent articles worth reading:

Right-Wingers Who Think They Got 'Rolled' by Obama In Cliff Deal Are Totally Crazy

Either they get everything they want, or they scream bloody murder.

By Joshua Holland

I thought that by this point, I was beyond the capacity to be shocked by the delusions held by the American Right. But my jaw dropped when I read that a number of high-profile conservatives are outraged  about the fiscal slope deal, and believe they have been “rolled” by Obama. The very notion is wildly delusional....{Read on}

The Long Con: Social Security and Medicare in the “Grand Bargain”

Update below.

“Social Security and Medicare have absolutely nothing to do with the short-term U.S. fiscal problem.”

And, no, not “long-term,” either, in any way that requires what’s being proposed.   Please, read the article by William Lind, which contains the chart and quote linked above.  It’s a clear, short analysis that I hope will put an end for you to the mendacious tropes constantly peddled throughout the media that suggest the opposite.  Let it sink in, once and for all: absolutely nothing.  (You might also want to take a look to my previous post on Social Security, to see that this program is one of the United States government’s biggest creditors.) 

As I was saying...

Update on previous post, "Social Security in the Great Jambalaya,":  Dean Baker, in The Guardian, "Cutting back benefits could mean delays in repaying the government bonds held by the Trust Fund. The money to repay these bonds would come primarily from a relatively progressive income tax revenue. ,,,,Politicians, especially Democrats, who speak up for cuts to social security can count on lavish praise from the media." 

As I Was Saying...

“You know, I suspect that, on Social Security, we’ve got a somewhat similar position.”

And on a lot of other things, too.

Social Security in the Great Jambalaya

Further thoughts on the program in peril.

Is there a Social Security crisis or not?  To hear some tell it, the Social Security Trust Fund* is insolvent, nothing but a collection of “worthless pieces of paper.”  To hear others tell it, the Social Security Trust Fund has a surplus of 2.5 trillion dollars (and growing), composed of “good as gold” US-government issued securities.   

These positions are usually associated with “conservative” and “liberal” camps, respectively, although, as usual in American politics, these labels are not particularly helpful.  Whether one supports or opposes Social Security is a matter of principle, and does not depend on the value of the securities presently in the Trust Fund.  Those who oppose Social Security will do so if the securities are “good as gold,” and those who support it will, or should, do so even if those securities are “worthless.” Whatever political challenge it might pose for the side we favor (and here, that is definitely supporting Social Security), an honest evaluation of these securities is necessary in its own right, in order to help us prepare effectively for whatever political challenge we face.  Politics is not the art of making people think it will be easier to achieve their goals than it actually will be.

Since it is the value of these “securities” about which the two positions on the Social Security “crisis” so vehemently disagree, in order to understand how they are both right, and all wrong, one must take a careful look at the specific economic and political characteristics of the securities in question.  It is also necessary to understand the hijinks that have been happening with the Trust Fund over the past 30 years.

No Account: The Social Security Hope-a-Dope

There’s an email petition appeal going around from firedoglake (FDL), encouraging us to “Hold The Obama Campaign To Its Guarantee of 'No Changes' to Social Security". It lays out very nicely how, on the one hand, “Joe Biden 'guaranteed' the president would not touch Social Security if re-elected,” and, on the other, “the president again voiced support for ‘tough spending cuts’ to programs like Social Security and Medicare... and complains he doesn't get enough credit for his own willingness to cut benefits.” [FDL’s emphasis]

FDL has been good on a lot of issues, especially healthcare reform, where they campaigned for single-payer relentlessly.  But how, exactly, are they going to “make sure the Obama administration honors this commitment”?  With a petition?  Really?  Isn’t it obvious, from their own experience, that Obama is going to talk out of both sides of his mouth during the campaign, and do whatever he wants after the election?  And what he wants is to be remembered as the fiscally-responsible Democrat who cut Social Security.