THE PAYROLL TAX CUT: Talk about a Ponzi Scheme!

Is President Obama trying to kill Social Security without explicitly saying so?  He put Social Security "on the table" for consideration by his Deficit Commission -- even though Social Security has not contributed to creating or sustaining the deficit/debt in the first place.  He kept Social Security on the table when he made a deal to delegate deficit reduction authority over entitlements to an undemocratic Super Committee.  Now, in a speech reportedly about jobs, he proposed to extend and increase the ill-considered FICA tax cut he embraced last December -- a tax cut that directly undermines the financial integrity of Social Security.

According to the White House Fact Sheet on "The American Jobs Act" (http://www.whitehouse.gov/the-press-office/2011/09/08/fact-sheet-american-jobs-act) the FICA tax holiday for workers will be increased to a 50% reduction, lowering it to 3.1%.  Under the 2010 tax deal, the payroll tax for workers was reduced from 6.2% to 4.2%.  In addition to expanding the tax cut for workers, the President proposes to extend the FICA tax holiday to employers by cutting in half the employer's share of the payroll tax through the first $5 million in payroll. 

Big questions about the wisdom, efficacy, and implications of a tax-based jobs strategy need to be debated.  Even bigger questions about the consequences of the payroll tax holiday in particular need to be answered.  These questions are not just about the relationship between payroll tax cuts and job growth.  They are about the future of Social Security.

The FICA/payroll tax goes into the Social Security Trust Fund.  This is a dedicated fund currently worth $2.6 trillion, which has been built up over time through employee and employer contributions, along with accrued interest.  Current and future Social Security beneficiaries receive benefits from this fund.  No general revenues are involved.

Under the payroll tax cut initiated in the 2010 lame duck tax deal, the revenue loss to the Trust Fund from the payroll tax holiday is made up through compensatory payments into the Trust Fund from general revenues. The President proposes to continue this scheme -- deepening a relationship between Social Security and general revenues (read deficit) that did not exist until the December 2010 tax deal.  This will make Social Security increasingly vulnerable to demands for "reform."

In the worst case, Congress could choose to enact the payroll tax cut without actually appropriating revenue compensation for the Trust Fund.  This would mean that the payroll tax cut directly depletes the Trust Fund, creating financial/actuarial problems far sooner than the currently anticipated shortfall date of 2036.

But even if the Trust Fund receives full revenue compensation -- for both employer and employee contributions -- Social Security will be jeopardized.  That's because the resources in the Trust Fund will be increasingly comingled with general revenue funds -- and, hence, increasingly connected to the deficit.

The government has borrowed from Social Security to pay for other things (through IOUs, bonds, etc). It does need to use general revenues to make good on borrowed funds. But this is a debt owed TO Social Security, not a debt caused by Social Security. This is a debt owed to the millions of workers who have contributed to the Social Security system through the payroll tax. However, now that general revenues are contributed to the Trust Fund to offset the cost of the tax holiday, some people will undoubtedly claim that Social Security has become a drain on the national treasury.

Also worth worrying about here is contagious political cowardice about "raising taxes."  The payroll tax holiday is framed as just that -- a holiday, ie, a short-lived break. But as we know from other tax cuts with built-in expiration dates, the planned end of a tax cut quickly becomes a "tax increase" in popular parlance.  There hasn't been much resolve to allow the years-long tax holiday for the rich to end.  When the time comes, will there be greater resolve to allow an end to the 2-year tax holiday for workers and 1-year tax holiday for employers?  Even when billed as a "middle class tax increase" and a "job-killing tax on business"?

Once the payroll tax basis of Social Security financing has been corrupted the future of Social Security will no longer be in doubt.  It won't have one.

Urge Your Congressmember to CoSponsor the Conyers Resolution Opposing Cuts to Medicaid, Medicare, and Social Security

Oppose Cuts to Medicare, Medicaid, and Social Security

Cosponsor H. Con. Res. 72

Clearly state that any legislative language approved by the Joint Select Committee on Deficit Reduction should not reduce benefits for Social Security, Medicare, and Medicaid recipients.

 Current Cosponsors (38):  Grijalva, Lee, Johnson (GA), Thompson, Al Green, Towns, Jackson-Lee, Woolsey, Schakowsky, Jackson, Clarke (NY), Richardson, Christensen, Honda, Waters, Davis (IL), Butterfield, Fudge, Lewis (GA), Cummings, Gonzalez, Kucinich, Filner, Wilson (FL), Bass, Stark, Hinchey, Clarke (MI), Cleaver, Bordallo, Frank, Gutierrez, Courtney, Nadler, Reyes, Olver, Cohen, Rush    

Dear Colleague:

As you know, the debt ceiling package that was recently signed into law by President Obama creates a Joint Select Committee on Deficit Reduction.  This committee is tasked with improving the short-term and long-term fiscal imbalance of the Federal Government by identifying at least $1.5 billion in additional cuts.

The creation of the Joint Select Committee on Deficit Reduction makes three of our country’s most vital safety net programs - Medicare, Medicaid, and Social Security - targets for cuts.  Such cuts would be highly unpopular with the public and would weaken the health of our social insurance programs at a moment when the economy is reeling.  

Congress needs to go on the record and state its intent to preserve America’s safety net and social insurance programs.  The Super Committee needs to prioritize the preservation of Medicare, Medicaid, and Social Security and focus on finding a means of balancing the budget that doesn’t harm working families. 

If you would like to cosponsor H. Con. Res. 72, please contact Michael Darner in my office at michael.darner@mail.house.gov.

Sincerely,

John Conyers, Jr.

MEMBER OF CONGRESS

CONCURRENT RESOLUTION

Expressing the sense of Congress that any legislative language approved by the Joint Select Committee on Deficit Reduction should not reduce benefits for Social Security, Medicare, and Medicaid recipients.
Whereas S. 365, the `Budget Control Act of 2011', creates a Joint Select Committee on Deficit Reduction tasked with providing recommendations and legislative language that will significantly improve the short-term and long-term fiscal imbalance of the Federal Government;
Whereas large majorities of Americans want to address the deficit in a way that preserves Medicare, Medicaid, and Social Security benefits;
Whereas the Medicare program reflects the Nation's commitment to the health and independence of older Americans and Americans with disabilities by providing health care coverage to 42 million people;
Whereas Medicare safeguards beneficiaries and their families from the ruinous costs of medical treatments and prevents individuals from spending unmanageable proportions of their incomes on medical care or being pushed into poverty by their medical bills;
Whereas Medicaid provides a safety net for both low-income and middle-class families who may have family members stricken with catastrophic illness or injury or face prolonged infirmity in old age;
Whereas cuts to Medicaid would severely impact low-income families and individuals with disabilities, and curtail access to critical services, including nursing home and community care services;
Whereas cuts to Medicaid would limit the program's ability to provide women without health care coverage with prenatal, maternity, and postnatal care and hamper the United States efforts to prevent infant and prenatal deaths;
Whereas Social Security provides essential financial support to almost 55 million people in the United States, including more than 35 million retired workers;
Whereas Social Security provides modest benefits averaging $14,000 per year for retired workers, based on contributions paid into Social Security over a worker's lifetime of employment;
Whereas Social Security can pay full benefits through 2035;
Whereas Social Security has no borrowing authority, currently has $2.7 trillion in accumulated assets, and, therefore, does not contribute to the Federal budget deficit; and
Whereas the citizens of the United States deserve thoughtful and fair Social Security reform to protect current and future benefits and to ensure ongoing retirement security for seniors, protections for persons who become disabled, and benefits for the young children and spouses of deceased and disabled workers: Now, therefore, be it

Resolved by the House of Representatives (the Senate concurring), That it is the sense of Congress that—

(1)    any deficit reduction plan put forward by the Joint Select Committee on Deficit Reduction should not balance the budget by eroding America's hard-earned retirement plan and social safety net;

(2)    Medicare's ability to deliver high quality health care in a cost-efficient manner should be strengthened and its benefits should be preserved for current and future retirees;

(3)    appropriate reform to strengthen Social Security's long-term outlook should ensure that Social Security remains a critical source of protection for the people of the United States and their families without further increasing the retirement age or otherwise decreasing benefits; and

(4)    Federal funding for the Medicaid program should be maintained so that senior citizens, poor and disabled children, and others with disabilities are able to gain and retain access to affordable health care.

Tell the Super Committee: Hands Off Social Security!

Where the Super Committee Members stand on Social Security, Medicare and Medicaid:
http://strengthensocialsecurity.org/where-the-super-committee-members-stand-on-social-security-medicare-and-medicaid

Tell the Super Committee:  Hands Off Social Security!
http://salsa.wiredforchange.com/o/6405/p/dia/action/public/?action_KEY=4617

What Happened to Obama’s Passion? - NYTimes.com

From Drew Westen's Op-Ed: "Like most Americans, at this point, I have no idea what Barack Obama — and by extension the party he leads — believes on virtually any issue. The president tells us he prefers a “balanced” approach to deficit reduction, one that weds “revenue enhancements” (a weak way of describing popular taxes on the rich and big corporations that are evading them) with “entitlement cuts” (an equally poor choice of words that implies that people who’ve worked their whole lives are looking for handouts). But the law he just signed includes only the cuts. This pattern of presenting inconsistent positions with no apparent recognition of their incoherence is another hallmark of this president’s storytelling. He announces in a speech on energy and climate change that we need to expand offshore oil drilling and coal production — two methods of obtaining fuels that contribute to the extreme weather Americans are now seeing. He supports a health care law that will use Medicaid to insure about 15 million more Americans and then endorses a budget plan that, through cuts to state budgets, will most likely decimate Medicaid and other essential programs for children, senior citizens and people who are vulnerable by virtue of disabilities or an economy that is getting weaker by the day. He gives a major speech on immigration reform after deporting a million immigrants in two years, breaking up families at a pace George W. Bush could never rival in all his years as president." What Happened to Obama’s Passion? - NYTimes.com

And this is only a partial list of inconsistencies and doublespeak...

Bad Policy, Bad Process, Bad Faith -- Bad Deal

   
The Debt Deal certainly is better than the Boehner Bill, and better still than the Tea Party favorite, the Cut, Cap, and Balance bill.  But it is nonetheless bad policy, bad process, and bad faith. Arbitrary spending caps and across-the-board spending cuts are lazy, wicked, and destructive mechanisms that disguise glacial policy change. The proposed Super Committee and its fast-tracked decisions are anti-democratic and irresponsible -- both procedurally and substantively -- delegating plenary legislative authority from the many to the few.

The losers in this deal are the people -- especially the poor, the elderly, the medically vulnerable, and the jobless. This debt deal should put an end to Democratic excuse-making for President Obama's failure to end the jobs crisis and his willingness to put the social safety net at risk. In this debt deal, we have a Democratic President serving up to slaughter Medicare, Social Security, and Medicaid -- by the Super Committee, whose work must be approved as-is if across-the-board spending cuts or another default crisis are to be averted.

While the deal does not target Medicare, Medicaid, and Social Security for immediate cuts, it does offer up Medicare for across-the-board cuts should the Super Committee fail to report a deficit reduction package, should the Congress reject it, or should the Congress kill a Balanced Budget Amendment. The White House says Medicare cuts will affect providers, not beneficiaries. But in the absence of Medicare-for-All or some other single payer system, cuts to Medicare providers inevitably will impose costs on beneficiaries, increasing numbers of providers who refuse to treat Medicare patients.

    Social Security and Medicaid are to be exempted from across-the-board cuts triggered by failure of the Super Committee.  But before we even get to across-the-board cuts, the Super Committee will be empowered to cut ("reform") Social Security, Medicare, and Medicaid as part of its deficit reduction package.  

    This morning, a White House official reportedly lamented that some Democrats just don't see the need to reduce the deficit.  What a sad day when a Democratic White House snidely condemns policy makers who express legitimate dismay at a deal that will spread poverty and economic insecurity."

Don't Put the Future of Medicare, Medicaid, and Social Seurity in the Hands of a Super Congress!

Call your Congressmember and Senators today!

http://fdlaction.firedoglake.com/2011/08/01/whip-the-super-congress-call-and-ask-your-member-of-congress-if-they-like-their-job/

Gang of Six Plan Would Cut Social Security for Ordinary Workers While Cutting Taxes for the Rich

Center for Economic and Policy Research: Statement on the Gang of Six Plan | Press Releases

"The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled. Despite claiming that they will "reform" Social Security on a "separate track, isolated from deficit reduction," the plan includes cuts to Social Security that would be felt in less than six months, as the plan calls for a new inflation formula that will reduce benefits by 0.3 percentage points a year compared with currently scheduled benefits. The plan also calls for a process that is likely to reduce benefits further for future retirees."

For more information on the Gang of Six Plan see the CEPR Statement at http://www.cepr.net/index.php/press-releases/press-releases/statement-on-the-gang-of-six-plan

Stop the Cuts to the Social Safety Net!

Medicaid cuts will injure communities of color disproportionately.  11% of Asian Americans, 14% of Native Hawaiians and Pacific Islanders, 27% of Latinos, and 27% of African Americans gain access to health care through Medicaid.

Medicaid cuts will injure women disproportionately.  Women account for 70% of Medicaid participants.

Social Security is survival income for many older women, especially older single women.  Fifty percent of women over age 65 rely on Social Security for 80% or more of their income.  According to the Institute for Women's Policy Research: Unmarried women living alone aged 65 and older are three times more likely to be living in poverty than married women aged 65 and older (16.6 percent compared with 4.8 percent). Without Social Security benefits, more than two-thirds of these unmarried women would live in poverty.

An increase in the Social Security retirement age equals a cut in benefits.  The average benefit for women age 65-74 is $10,300; for men it is $13,400.  Neither men nor women can afford benefit cuts.

The "Chained CPI" is a COLA cut. It is a cut in benefits seniors cannot afford. According to the National Women's Law Center: For a woman who gets a benefit of $1,100 at age 65, replacing the current COLA with the chained CPI would mean $56 less per month and $672 less per year at age 80.  That may not sound like a lot to some members of Congress—but it’s equivalent to the loss of more than a week’s worth of food per month or 13 weeks of food that year.
 
Stop the Cuts -- Sign the Petition calling for Congress to RESPECT women, PROTECT Social Security, Medicare, and Medicaid, and REJECT any budget plans that threaten the economic security of women. http://salsa.wiredforchange.com/o/6405/p/dia/action/public/?action_KEY=4411

"Our bedrock social safety net programs should not be adjusted as part of some deal -- any changes to improve the solvency of these programs should stand on their own merits and be considered separately."

This weekend, nine Senators sent a letter to the President reminding him that Social Security does not contribute to the deficit and so should not be sacrificed in the name of deficit reduction.  In addition to Senator Bernie Sanders (I-VT), who sent a strong letter to the President last week, the signers included Senators Akaka (D-HI), Begich (D-Alaska), Blumenthal (D-CT), Franken (D-MN), Merkeley (D-Oregon), Stabenow (D-Mich), and Whitehouse (D-RI).

The letter reads:

Sen. Bernie Sanders: We Will Not Balance the Budget on the Backs of Working Families | Truthout

Please Sign Senator Sanders' letter urging President Obama to stand up to the Republicans in the budget battle: http://sanders.senate.gov

Sen. Bernie Sanders: We Will Not Balance the Budget on the Backs of Working Families Truthout