SOCIAL INSECURITY

11/22/11

In the wake of the miserable but predictable failure of the Committee of Dolts (er, sorry, the Supercommittee) to even begin to address our budget deficit problems (See today’s other post, OH YEAH…HAPPY DAYS ARE HERE AGAIN ALRIGHT.), several other pieces of unfinished business loom for our selfless public servants. One of these is the pending (12/31/11, I think, but I could be wrong) expiration of the FICA payroll tax holiday that was instated in yet another attempt by your government to solve a problem that had its origins in too much spending by encouraging more spending.

It’s hard to see how the denizens of the Den of Iniquity on the Potomac are going to let the payroll tax holiday end. The Democrats, including President Obama, support the holiday as a tax cut that directly benefits lower income earners. The Republicans, though seemingly against anything the Democrats oppose in the proud Washington tradition of never letting a good idea get in the way of hair-shirted partisanship, would have a hard time letting the payroll tax be reinstated for a few reasons. First, they are reflexively, and understandably and, generally, laudably, in favor of any kind of tax cut and, conversely, against any kind of tax increase. Second, the GOPers would have a hard time taking the political flak that would result from opposing a tax cut at the low end while fighting hard to preserve a tax cut at the upper end of the income scale. Further, congresspersons from both parties would have a hard time letting the payroll tax expire while the economy is still sputtering along, at best. As Nixon once said, we are all Keynesians now and even those who would deny that observation by one of our most brilliant yet failed presidents have enough common sense, and/or sense of political survival, to not put the drag that would accompany such a tax increase on an already struggling economy.

To take this a step further, it’s hard to see how the payroll tax will ever be reinstated. This is an onerous (about 7.65% on the employee side, the side currently being suspended) tax that affects just about everyone who earns a dollar in this country. Reinstating such a tax would amount to a huge tax increase and the profiles in courage who can’t cut 3% out of a budget (Again, see today’s other post, OH YEAH…HAPPY DAYS ARE HERE AGAIN ALRIGHT.) surely cannot take the heat that would result from such a move. So it might be safe to say that the payroll tax as we understood it since the days of FDR is gone forever.

So what will happen to social security? God only knows, and He’s not talking. However, it might be a good thing to eliminate the tax that ostensibly supports social security but in reality merely supports every other government program. Then we could eliminate the fiction that social security is somehow an off-budget program supported by “contributions” from participants and so need not be financed out of given year’s revenues. Only when we realize that there is no “trust fund” and that, ultimately, social security payments can only be made from the revenues generated in the year they are paid can we begin to address this badly mismanaged program’s problems. So this might be an instance in which the politicians’ very timidity ironically forces them to summon up the courage to address one of our real fiscal problems. But I am probably being hopelessly optimistic, not one of my most salient faults, in thinking that anything can force the poltroons we have sent to Washington to address the problems they have created.