"Even though Social Security contributed nothing to the current economic crisis, it has been bartered in a deal that provides deficit busting tax cuts for the wealthy. Diverting $120 billion in Social Security contributions for a so-called 'tax holiday' may sound like a good deal for workers now but it's bad business for the program that a majority of middle-class seniors will rely upon in the future." Barbara B. Kennelly, President/CEO
Conservatives have long dreamed of a payroll tax holiday because it fulfills two ideological goals, lower taxes and weakening Social Security's finances. The White House claims the 2% payroll tax cut won't impact Social Security; however, we disagree.
There's no such thing as a "temporary" tax Cut. If Congress is unwilling to allow tax cuts for wealthy Americans to expire in the midst of economic crisis now, then why would it allow this so-called "holiday" to end in one year? The short answer--it wouldn't. Americans should expect that when this tax "holiday" ends, restoring Social Security's funding will be portrayed by those opposed to the program as a massive tax hike, rather than the legislated end of the "holiday". That leaves Social Security permanently dependent on general fund revenues rather than worker contributions which have successfully funded the program for 75 years. If extended, this payroll tax cut would then double Social Security's 75 year projected shortfall.
This 2% payroll tax cut is the beginning of the end of Social Security as we know it. Worker contributions have successfully funded the 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.
Cutting contributions to Social Security isn't the best way to stimulate the economy. The Tax Policy Center reports the wealthiest 40% of households benefit most from a payroll tax cut. According to The Center for Budget and Policy Priorities, extending the "Making Work Pay Tax Credit" is a much better and targeted stimulus.
For all of these reasons, the National Committee does not support proposals to cut the payroll tax. America's seniors understand the vital role Social Security plays during these difficult economic times and they're not willing to trade promises of possible short-term economic gains for real and measurable damage to this vital program which would impact generations of Americans to come.
The American Association of Retired Persons (AARP) seems to sort of agree but they do not seem ready to lead opposition.
You are correct, that according to the trust fund perspective, the fund's "revenues" will be cut.
ReplyDeleteThe FICA taxes are not revenues reserved for Social Security, according to the Social Security Administration itself!
In a paper entitled "Reports and Studies, The Committee on Economic Security, Social Security in America, Part 2, Old-Age Security, Chapter 10:
"Taxes are collected as are other internal revenues and are not allocated as was proposed to an Old-Age Fund, but are merged with the general funds of the Government in the Treasury."
"Provisions of Title 2 differ a lot from the principles of the proposed program. The appropriations are not measured by any taxes collected under Title 8, but are measured by an amount to be determined on a reserve basis according to actuarial principles. The amount required yearly may be much more or less than the tax revenues levied in Title 8."
"Benefits are paid based on the status of a worker, measured by wages. Should no taxes be paid, the worker still gets his annuity.
Government's obligation to the Old-Age Account is not dependent upon enough revenue from taxes to reimburse the Treasury for the appropriation to the Old-Age Account."
"The original bill made the receipt of benefits contingent upon paying taxes. Under the Social Security Act there is no interdependence between the taxing and appropriation of benefits paid. Even if no taxes are paid, he still receives his benefits."
http://www.ssa.gov/history/reports/ces/cesbookc10.html.
Don Levit
Yes, Mr. Levit. Then SSA goes back and has IRS collect the FICA from the employer who failed to collect the proper tax. The employee may also owe tax. There you are. Used to do claims for people with nothing but payslips for proof of insured status. No tax paid at the time of filing, no problem--the person's work conveys insured status. But, as I said, then the tax has to be collected. And, is. Whether the employer likes it or not. Lots of small employers hear from IRS like this every year. If the tax isn't paid, the person still gets credit.
ReplyDeleteNow, your point is that SS is welfare. It is the sum of every argument I have seen you make here and elsewhere. So, here I am to say again, it's not welfare because it's not based on need. So, if you want to turn it into welfare, fine. Argue your case to Congress, but a blog devoted to the SS Disability program for the people who work to make it succeed is not a proper forum for such an effort. Nancy Ortiz
This particular bill as proposed is revenue neutral because the 2% of FICA not collected during the holiday will be replaced by general revenues deposited to the TF. Otherwise, any discrepancies are handled as I described above. NO
ReplyDeleteLevit please leave these people alone. Your basic argument and many variations has been discredited on every economics policy website that deals with this issue and your interpretation of this document (like every other) is flawed.
ReplyDeleteSocial Security is an insurance product that blends straight out disability and survivors insurance with an inflation adjusted annuity. Like all such insurance products there is no pay-in while benefits are being collected, there is always a time shift. And like many insurance products there is no absolute connection between TOTAL benefits and TOTAL contributions, if you crash your car on the way home from the insurance office you get paid full price for the car, if you never crash it you get nothing, in fact less than nothing. That is the difference between insurance and either an investment fund or a straight out reserve fund.
Plus the Committe on Economic Security was in operation from 1934-35 and issued its initial Report in that year. The document you are quoting from is described as follows:
"The basic text of the original CES report to the President was 50 printed pages, with an Appendix containing a list of Committee members and 19 additional tables of data. It is reproduced here in its entirety, along with the Committee's Transmittal Letter to President Roosevelt and the President's Transmittal Letter sending the Report to the Congress.
The full work of the CES was contained in 10 large volumes of reports and studies, which were never published. In 1937, two years after passage of the Social Security Act, the new Social Security Board published a summary of all 10 volumes of the Committee's work. This book, "Social Security In America," published in 1937, contains the Appendix and Tables from the original CES report, and a great deal more besides."
The portion of text you cite is from page 213 of vol 10 (not that you provided a page reference) and describes the differences between the Act as passed as PL 271 in 1935 and the recommendations of the Committee. It is NOT a statement of current SSA views. As the URL suggests this is simply a historical report meant to be of interests to HISTORIANS. Given the state of your prior knowledge it is unlikely in the extreme that you just came across this obscure 1937 work and were instead pointed to it by some propagandist who himself knows what he is doing.
Don you have proven yourself to be a simple shill for a person or persons unknown (though I have my guesses). There is no reason for anyone on this site to take you seriously, certainly no one at any other site you have visited does. You are repeating talking points and clearly are relying second hand on sources supplied by others. If not you did a really sloppy job of actually putting this Report in its context and properly citing it. I should not have to be coming along after the elephant and sweeping up your droppings this way.
To repeat this is from a Report compiled in 1937 to describe the work of a Committee in operation from 1934-35 along with a description of how the final legislative product compared with the proposal. You are presenting this 73 year old work as current opinion and have presented totally out of its actual context. I'd call you a liar but strongly suspect you don't even know this is what you are doing.
Don just give it up.
Here is the link to the NCPSSM statement: http://www.ncpssm.org/news/archive/cutting_contributions_to_social_security/
ReplyDeleteMr. Levitt: I assume then that when this payroll tax "holiday" escalates the Social Security shortfall to a real crisis (unlike the current imaginary crisis)you won't be yelling to cut Social Security and/or means-test it?
ReplyDeleteNancy:
ReplyDeleteI will not respond to you until you respond to my excerpts.
Let's keep the discussion civil and objective.
Bruce:
How about something a bit more up to date, not that it means the prior post was inaccurate:
From a paper entitled "Analytical Perspectives, Budget of the U.S. Government, Fiscal Year 2009:"
Page 183 "Why are Social Security and Medicare not shown as Governmental liabilities in Table 13-1?
There is no bright line dividing Social Securitry and Medicare from other programs that promise benefits to people, and all the Government programs that do so should be accounted for similarly.
Furthermore, treating taxes for Social Security or Medicare differently from other taxes would be highly questionable."
Page 195 "The trust fund surpluses could have added to national saving if overall government borrowing from the public had actually been reduced because of the trust fund accumulations. At the time Social Security or Medicare redeems the debt instruments in the trust funds to pay benefits not covered by income, the Treasury will have to turn to the public capital markets to raise the funds to finance the benefits, JUST AS IF THE TRUST FUNDS HAD NEVER EXISTED."
http://www.gpoaccess.gov/USbudget/fy09/pdf/spec.pdf.
This is not a debate between Bruce and Don.
This is a discussion between Bruce and the "Analytical Perspectives of the U.S. Government, Fiscal Year 2009," which you cited on the Angry Bear Blog, before I was kicked off.
Don Levit
Mr. Levit--I do not expect a response nor do I welcome one. Nancy Ortiz
ReplyDeleteThe Social Security program is not what I would call welfare (SSI paid to people age 65 and older I would call welfare), but the retirement program does give low wage workers a larger return on what they paid in than high income workers.
ReplyDeleteof course Title 2 is not welfare, but Title 16 is. and the resources it takes to administer and check on Title 16 resources just adds to the drain.
ReplyDeletethese are people who have never paid into the system or they have run out of coverage, and all moneys devoted to it is a net loss. i am not making any judgment as to the social utility of the program (in fact i believe it is economically beneficial to keep these people from the brink), but in my mind it is purely an accounting loss that we need to address, i.e., fund somehow.
Can anyone explain to me why Mr. Levit keeps riding this hobby horse? Why does he continue to think that's he's discovered some long-held government secret that he and he alone will unveil to the gullible public to put things right? The "trust fund apple" didn't just fall on your head and your head alone, Mr. Levit.
ReplyDeleteMr. Levit is a financial advisor who provides advice to employers regarding their various insurance plans and ERISA liabilities. He also has an interest in the stock and bond market as an outgrowth of his main business. If SS no longer existed, or were reduced to a minimal program of no value in retirement planning, people would likely seek to invest more in the financial markests as a means of providing for their old age. It is in Mr. Levit's financial interest to argue against SS as a reliable source of retirement and disability social insurance.
ReplyDeleteThus, Mr. Levit argues that we would be better off to invest in the markets than to pay for a guaranteed SS benefit. His posts appear on such blogs as Zero Hedge, Angry Bear, and EconoSpeak where frequently comments. FYI. Nancy Ortiz
Last anonymous:
ReplyDeleteI have been accumulating excerpts and links on Social Security and Medicare for many years.
Much time and effort has gone into this collection.
I certainly am not the only one to mention these ideas, but I am relatively unique in that I post excerpts and links from governmental web sites in order to lend credibility.
Otherwise, I'm just another silly fellow out there with an opinion.
Nancy:
If you are suggesting I am biased against Social Security, I would say you are wrong and you are right.
You are right, in that I am opposed to how it is funded. Certainly it is not funded as an insurance/retirement plan as we know it.
How many pension plans loan their assets to to an entity that is part of the "corporation," to pay for the other part of the corporation's expenses, and then hope to be repaid, somehow, by profits and debt.
The trustees of such a plan would be put in jail.
I will say that the retirement plan for federal employees is run similarly to Social Security, and i have the links to back it up.
You are wrong about my ideas regarding Social Security, for as it was originally envisioned, I support it.
The dollars were supposed to go directly into the trust fund, not the Treasury, number 1.
Number 2, those dollars are not saved, in order for the program to be self-supporting.
I am very concerned about the wealth gap in this country.
Ten percent of the households own 73% of all financial assets. That spread is not sustainable if 70% of our GDP relies on consumers. If that's the case, can you imagine how much consumption the top 10% have to engage in? Remember when consumptuion used to be a disease? More than half of our elderly depend on Social Security for over half of their income.
It is not the program I am against. It is how it has evolved versus how it was originally designed I am against.
As far as being biased, of course I am, I am a human being.
I would imagine the same classification could apply to you.
Because Iam aware of my biases, I provide governmental links to establish a bit more credibility and objectivity to my statements.
Don Levit
OK, Don, here's your problem, and I quote you:
ReplyDelete"The dollars were supposed to go directly into the trust fund, not the Treasury, number 1.
Number 2, those dollars are not saved, in order for the program to be self-supporting."
Saved? What, you want them deposited in Fort Knox, each and every buck, where they would...what? Can't grow if they're just stuck away. This is nonsense, and those who drafted the Social Security Act knew it was nonsense. You're either being disingenuous or you're dumber than a stone.
Anonymous:
ReplyDeleteI agree it is a difficult situation to know what do with the surplus, other than pay for current expenses?
But, a retirement/savings plan, particularly as Roosevelt seemed to envision it, has to do something different in order to not use general revenues.
Paying for current government expenses, and making the deficit appear to be smaller, sets up the eventual use of general revenues.
Personally, I believe it should have been privatized from the start.
It should have been set up as individual annuities, as it was originally discussed in the deliberations.
Don Levit
Well, sure, it was discussed but it ain't what happened. It's a pay as you go system, for the most part, and the very sharp people who wrote the legislation understood that very clearly. Given the state of the economy in 1935, it was the only option for getting a system going.
ReplyDeleteAnd now, in 2010, you can't go back (time machine aside) and undo or re-do it. Not unless you have a couple trillion bucks in your pocket, which we clearly do not have. So...why keep harping on this? It's water over (or perhaps under) the dam.