FICA Cut Likely To Pass

It appears that Congress will pass the tax cut compromise that will reduce the FICA tax "temporarily" while crediting the Social Security trust funds with the money they were supposed to receive.

There has been virtually no time for discussion of the long term Social Security consequences of this bill. This has been treated as a non-issue by almost everyone. There is every reason to be skeptical of the argument that this is only temporary. We are embarking upon a course that poses a grave long term danger to Social Security.

Update: I am not being paranoid. Congressional Republicans are making no secret of their plans:

Republicans acknowledged that the expiration of the tax holiday will be treated as a tax increase. "Once something like this goes into place, a year from now, when it expires, it'll be portrayed as a tax increase," said Sen. Bob Corker (R-Tenn.). So in a body like Congress, precedents matter and this is setting a precedent. I think that certainly is going to create some problems down the road if it passes." ...

"Once you bring a rate down, if it goes back up, people will feel that. They'll feel their paycheck being less and that argument" -- that letting it expire amounts to a tax hike -- "eventually is bound to be made," said Sen. Mike Johanns (R-Neb.).

"There's always a tendency to continue those things... Once something comes in, it's very difficult to change it," said Sen. George Voinovich (R-Ohio.) He then volunteered, without prompting, that "It would be detrimental to the Social Security system, especially when it's in bad shape." ...

Lamar Alexander, the Senate's number-three Republican, also said that reform of Social Security should be tied to moving that tax rate back up. "My personal hope is that it doesn't become permanent unless we deal with a way to make Social Security solvent over the long term ...

It also undermines the self-funding nature of the program, Bob Corker observed. "It really begins to break down the whole notion even further of a Social Security trust, when general fund money is going in," he said. "We've already abused the Social Security trust and there's no question that taking this action is just another portion of the camel nose under the tent."

Corker said he would have liked to see Social Security reform coupled with the tax cut.

GOP Thwarts $250 Checks

From the Associated Press:

House and Senate Republicans on Wednesday thwarted Democratic efforts to award $250 checks to Social Security recipients facing a second consecutive year without a cost-of-living increase.

President Barack Obama and Democrats have urged approval of the one-time payment, saying seniors barely getting by on their Social Security checks face undue hardships without the COLA increase.

But most Republicans contended that the nation couldn't afford the estimated $14 billion cost of the payment, and that the COLA freezes in 2010 and 2011 come after seniors received a significant boost in 2009.

The measure was brought up under a fast-track procedure in the House that required a two-thirds majority for passage. The 254-153 vote in favor of the bill fell short of that.

We cannot afford this but we can afford vastly more expensive tax cuts for the wealthiest Americans?

House Passes Appropriations Bill

The House of Representatives has passed the Omnibus Appropriations bill that would fund Social Security and most other agencies. It faces an uncertain prospect in the Senate.

NCPSSM Opposes FICA Holiday; AARP Sorta Opposes

A press release from the National Committee to Preserve Social Security and Medicare (no link available yet):

"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.

Omnibus Hopes Still Live?

There is an attempt in the House of Representatives to go forward with a omnibus appropriations bill to cover almost all federal agencies. There is considerable reason to doubt that the Senate can pass anything. For what it is worth, the bill (page 115) provides $11.24 billion for Social Security's administrative expenditures, as I read it. I find appropriations bills to be quite confusing. The President had recommended $12.38 billion.

Interview With Carolyn Colvin

Destiny-Pride has posted a lengthy interview with Carolyn Colvin, the nominee to become Deputy Commissioner of Social Security. Colvin finally gets a Senate hearing tomorrow on her nomination.

Goodbye, Social Security?

Firedoglake (FDL) has an excellent piece on the danger posed to Social Security by the "temporary" reduction in FICA. His conclusion is that this "will lead inexorably to killing Social Security" because Congress will never allow FICA to go back up. This doubles the 75 year projected shortfall in the Social Security trust funds which will lead to pressure to cut benefits, probably by means-testing benefits. According to FDL we can say "Good bye, Social Security. You did a great job for 75 years. Apparently, the President is ready to pull the plug on you, if not on Grandma herself."

Update: It will be interesting to see how major advocacy organizations react to this. I will be paying attention.

Further update: I should note that the FDL piece was by Nancy Altman, co-director of Social Security Works so we have heard from one important group. As far as I can tell, the others are silent so far. AARP, I'm looking at you. National Committee to Preserve Social Security and Medicare, I'm looking at you.

Medicare Prescription Drug Regulations

From today's Federal Register:

We are adding a new subpart to our regulations, which contains the rules we will apply to determine the income-related monthly adjustment amount for Medicare prescription drug coverage premiums. This new subpart implements changes made to the Social Security Act (Act) by the Affordable Care Act. ... These rules describe the new subpart; what information we will use to determine whether you will pay an income-related monthly adjustment amount and the amount of the adjustment when applicable; when we will consider a major life-changing event that results in a significant reduction in your modified adjusted gross income; and how you can appeal our determination about your income-related monthly adjustment amount. These rules will allow us to implement the provisions of the Affordable Care Act on time that relate to the income-related monthly adjustment amount for Medicare prescription drug coverage premiums, when they go into effect on January 1, 2011.