That will be the headline next year if Obama’s Tax Compromise deal passes. The tax rate next year will go up from 4.2% to 6.2%. Of course 6.2% just where it is today. Obama’s plan is to cut it this year by those two percent and then to bring it back, but the Republicans will paint it as a huge tax increase. It will be the new scare story in a country mesmerized with the idea that tax cuts fix everything.
Remember the Bush tax cuts were supposed to last just ten years, just enough time to get us roaring prosperity. Right. We can see how it’s impossible to let any part of the tax cuts die, even for billionaires.
The Obama tax plan would leave Social Security with a $120 billion dollar hole in the SS Trust Fund. Supposedly this would be made whole with $120 billion from the government (borrowed, of course). On the face of it this would be good. The payroll tax is very regressive. It’s a 6.2% deduction on the first $106,000 in wages. A gas station attendant pays the same rate as a pro baseball player. Plus for those whose wage is over $106,000 they pay nothing on the part of their pay over $106,000. Federal income tax is far more progressive. In fact the bottom half of earners don’t even pay income tax.
On the other hand the strength of Social Security was that it was untouchable. It was self-financing. It was an entitlement because workers paid for it. Right now it has a $2.5 trillion surplus.
If, however, the Trust Fund is kept under-funded and if the difference has to be made up each year, then Social Security becomes just another program and seniors have to stand in line with everyone from farmers to generals asking for dough. And when times are tough, then the gap just can’t be fully filled in, can it?
This would dovetail nicely with the Bowles-Simpson plan, wouldn’t it. Under-fund Social Security means and of course you have to raise the retirement age and cut back benefits.
The best thing would be to reform the Trust Fund financing and make it progressive, eliminating the wage cap and mirroring regular income tax.
But that’s not in the cards. In today’s poisonous climate all we can hope for is to keep the status quo, no changes to Social Security at all.
A Great Stink of Hypocrisy
Listening to the business news one of their experts was dumbfounded how easily the Republicans went along with Obama’s deal. After all during the campaign they said the growing deficits were as evil as the Devil’s hoofs. Now they were giving their OK to a plan that would raise the deficits by $ 900 billion
Could it be they were lying hypocrites who don’t care one bit about deficits and will support any plan for short term enrichment?
They do know how to point fingers, though. The high muck a mucks point their fingers at China, saying that it’s keeping its money at too high in value, raking in a trade surplus and causing our problems. Funny that’s not what was said when Third World countries went heavy into debt to U.S. banks. Then it was all looking down noses at those deadbeat countries, clucking tongues about countries living beyond their means, advising the wretches to tighten their belts, cut programs, and lowering wages until they could pay up.
Open the windows, the hypocrisy is stinking up the joint.