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.”

“Taxpayer Money” Threatens Medicare-for-All (And Every Other Social Program)

-Apocryphal (often spuriously attributed to Mark Twain)

Three assertions:

• There is no such thing as “taxpayer money.”


• Taxes do not pay for government spending. (Nor does debt. No revenue is needed.)


• Leftists who continue to talk as if “taxpayer dollars” must be collected to “pay for” government programs are undermining Medicare-for-all and every other progressive policy initiative. 

I know these assertions run counter to an economic ideology that has been ingrained in us as obvious and irrefutable, known for sure. And I know how easy and seemingly effective it is to say things like: “Look at all the taxpayer dollars going to the military. We should spend some of those taxpayer dollars on healthcare instead.” But I want to show, with specific examples, why using this language is a bad idea—a really bad idea.

Maggie’s Farm

There are two reasons why it's important to stop talking like this: 1) Because it's not true, and 2) Because it perpetuates an ideology of how money and public financing work that is not only false, but profoundly reactionary and politically damaging—that is designed to, and will, impede achieving the most basic progressive goals.

Let's deal with the second point first, since I know a lot of leftists won’t overcome their resistance to understanding and promoting an economic proposition that runs counter to the common wisdom unless they can see the political point of it.

Consider the logic of this language: If government spending depends on tax revenue, if the government—the public authority—is an empty pocket that has to be filled with dollars that originate in the private pockets of “taxpayers,” that means public wealth depends on private wealth. That means private wealth is the source, the wellspring from which the public treasury draws; It means that, without large concentrations of private wealth (which are subject to the highest rates of taxation), the public authority cannot function.

Is that not precisely the theoretical grounding of capitalist socio-economic theory in its most regressive Thatcherite form?

If that's true, we are then in a polity where those who pay more dollars in taxes have a prima facie credible claim to demand more influence on the use of those dollars by the public authority—i.e., more political power. After all, the government depends on them; they are its donors, the breadwinners of this household, the source of its wealth. In a taxpayer/donor-financed polity, you can debate whether "taxation is theft" and to what extent “winners”—i.e., meritorious taxpayers—are paying for “losers” and “moochers”—i.e., “undeserving” non-taxpayers. It’s a polity where social programs of universal benefit exist at the sufferance—whether forced or voluntary—of the wealthy, subject to constant negotiation about how far that should go.

This is the paradigm of noblesse-oblige, welfare-state capitalism, whether more or less “generous,” where the public authority—the federal government—must go hat in hand to the wealthy to pay for public services.

Who’s the Boss? The Obamacare Deception

"Of all the forms of inequality, injustice in health care is the most shocking and inhuman."

attributed to Dr. Martin Luther King, Jr.

Is it not painfully obvious to everyone now that the Affordable Care Act (ACA) is a complicated failure of a contraption, from a healthcare and a political point of view? Answer: Yes!  Even Michael Moore now admits that “Obamacare is awful.”

Indeed, I contend that:

• Obamacare is not a public program, but a government-assisted private boondoggle. Its main purpose is not to ensure public health, but to insure the profitability of private health insurance companies and the private pharmaceutical and hospital industries.
• It is the product of a now thoroughly corrupt political culture in which capital openly buys politicians, elections, and laws.
• It is failing politically at every level, and is even likely to fail in its actual socio-economic goal of perpetuating the profitability of the private health insurance industry.
• It cannot be “tweaked” into becoming a real public healthcare program, and every syllable of every argument for fine-tuning it does nothing but waste time and stand in the way of ever getting the single-payer, universal coverage, Medicare-for-all that we need.

Unfortunately, it was Democratic Obama cheerleaders like Moore – who refused four years ago to oppose the program and insist, as they should have (and promised they would!), on a public system – who helped to create the terrible situation we now have. (And Moore still seems to think Obamacare is “a godsend” that can be tweaked into perfection.  See Shamus Cooke’s wonderful takedown of Moore’s weaseling.)

As Norman Solomon put it, with their “disingenuous sales pitches four years ago, President Obama and his Democratic acolytes did a lot to create the current political mess engulfing Obamacare — exaggerating its virtues while pulling out the stops to normalize denial about its real drawbacks. That was a bad approach in 2009. It remains a bad approach today.”

The result has been a situation in which healthcare has become more thoroughly privatized, and the possibility of a single-payer Medicare-for-all system – the cheaper, more effective, already-proven and undeniably popular (favored by two-thirds of the public in 2009) solution – has become deferred even further, and made harder even to see or discuss.

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.)