Bloomberg News is reporting that some White House advisors propose diverting even more payroll taxes from Social Security as a way to spur the economy. A 2% employee payroll tax deduction was already included in the stimulus bill passed in December. That means $112 billion dollars will be diverted from Social Security this year alone. Just six months ago the White House promised this approach was just temporary even though we all knew that, in this town, tax cuts are rarely reversed. President Obama is now setting the table for extending some of those stimulus provisions. Will that include the employee payroll tax diversion from Social Security?will the administration renege on their promise made just six months ago?
?Some of the steps that we took during the lame duck session, the payroll tax, the extension of unemployment insurance, the investment in — or the tax breaks for business investment in plants and equipment — all those things have helped. And one of the things that I?m going to be interested in exploring with the members of both parties in Congress is how do we continue some of these policies to make sure that we get this recovery up and running in a robust way.? President Barack Obama, Joint Press Conference
The administration may also now double-down and add even more payroll tax diversions from Social Security–this time for business stimulus. Diverting revenue from Social Security to provide more employer tax breaks is not fiscal responsibility. But it does pander to conservatives who get the tax cuts they crave, while simultaneously crippling Social Security?s funding stream and fueling the fiscal hawks Social Security crisis campaign. For conservatives it?s a political winner, for millions of middle class Americans and their families it?s a fiscal failure:
?The talks reflect the political constraints the White House is operating under with the Republican majority in the U.S. House pushing to cut federal spending. A hiring stimulus based on a tax break for employers may appeal to Republican lawmakers, many of whom have called for measures to help businesses. The idea of cutting the employer contribution to payroll taxes also has recently been under discussion among Republican members of Congress, said Douglas Holtz-Eakin, who was chief economic adviser to the 2008 Republican presidential nominee, Senator John McCain of Arizona.? Bloomberg
So, once again it appears some in Washington, including some White House advisors, follow Fed Chairman Ben Bernanke?s infamous claim that the federal government should follow the lead of bank robber Willie Sutton and use Social Security as the piggy bank to solve our economic woes.
“Willie Sutton robbed banks because that’s where the money is, as he put it,” Bernanke said. “The money in this case is in entitlements.”
American workers have successfully funded the Social Security program for 75 years and that critical linkage between contributions and benefits is what keeps Social Security a self-funded program. Proposals like this threaten the program?s independence, forcing Social Security to compete for limited federal dollars.Targeting Social Security?s funding to provide economic stimulus is a uniquely dangerous and foolhardy approach. While December?s 2% payroll tax cut successfully diverted billions from Social Security, some suggest it may not have succeeded in creating the stimulus projected:
?The way things are going at the moment, all the payroll tax cut will do is offset the rise in gasoline and food prices, rather than provide a boost to real spending.” Capital Economics senior economist Paul Dales.
Weakening Social Security should not be a political bargaining chip this White House is willing to play in order to appease those whose borrow and spend fiscal policies got us here in the first place.