Friday, August 26, 2011

Not Trying To Ridicule Obama- Just Slipped Out

Go either way- but stay firm. (I know what you're thinking.)

In December of 2010, Congress, as suggested the President, lowered the payroll tax for employees (not employers) one year from 6.2% to 4.2% as part of the agreement to extend the Bush-era tax cuts. This was done, presumably to help stimulate the economy and was especially welcome by Democrats eager to cut a regressive levy. Unfortunately, reducing the payroll tax reduces the solvency of the Social Security system, a bug for most Democrats, a benefit to most Republicans and President Obama, who continually whine about the need to "reform" a program more successful than almost anything Washington ever has done.

President Obama wants to extend the payroll tax cut; Republicans, therefore, want it to expire. But there are two suggestions better than either of these options.

Yesterday, Senator Bernie Sanders proposed that the cap on the Social Security tax, now at $106,800, be adjusted so the "wealthiest Americans" pay. It should have been unnecessary to explain, but given the disinformation from conservatives and the mainstream media, Sanders' office reminded us that Social Security

has not contributed one dime to the federal deficit. It has a $2.5 trillion surplus, and it can pay out every nickel owed to every eligible American for at least the next 25 years, according to the Social Security Administration. A recent report from the non-partisan Congressional Budget Office estimated that Social Security is in even better financial shape and can pay all promised benefits until 2038.

The Vermont Independent was a little vague, not specifying whether all income over $106,800 would be taxed for Social Security or instead only that up to a certain figure (extremely unlikely) or only above a certain figure, $250,000, $1,000,000, or whatever.

Robert Reich, as an academic rather than politician, was more specific. A little over a week ago, outlining a series of steps to pull the nation out of its economic slump, he recommended Washington "exempt forst $20k of income from payroll taxes for two years. Make up shortfall by raising ceiling on income subject to payroll taxes." A year ago, he recommended the same, noting it "would give the economy an immediate boost by adding to the paychecks of just about every working American. 80 percent of Americans pay more in payroll taxes than they do in income taxes. And because lower-income people would get most of the benefit, it's likely to be spent." Reich seemed to be advocating that the reduction apply to employers as well as to employees.

Keep it simple by simply eliminating the cap on Social Security taxes. Or eliminate the cap for incomes above $250,000 (for all income) and exempt the first $20,000 (or $30,000, if the numbers work), thereby introducing progressivity to the tax and stimulation to the economy. Either proposal would strengthen the Social Security system- as its critics always claim is necessary- and leave unscathed the lower and the middle classes. We must save Social Security for future generations, the Republicans, President Obama and other neo-liberals say; this is their chance.

And of course, this is the reason that Republicans won't go for it, inasmuch as the destruction of one of government's social insurance systems is one of the objectives of the anti-government party (except when its governors accept stimulus funds to balance their budgets; nope, even then). President Obama would like to see this reform occur because, as one who wishes to be remembered as a transformative President, he really would like to ensure the solvency of the Social Security system for the forseeable, or unforseeable, future. Unfortunately, he believes one way to do that is by a de facto reduction of benefits, whether by raising the eligibility age or the COLA formula, perhaps with chained CPI. And it is the same President Obama of whom (allegedly) God earlier this week tweeted

There was just a 6.0 earthquake in Washington. Obama wanted it to be a 3.4, but the Republicans wanted 6.0, so he compromised.

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