How about a revenue-neutral $300B plus stimulus that also saves social security? Sound crazy? Actually, it is pretty easy. All we need to do is apply some free-market principles to social security. Ok, stop banging your head against your keyboard and jump the squiggly....
Most people think of the free market as a mechanism that delivers the best products in the most efficient manner at the lowest prices. That is the fantasy of the free market. People who truly understand free markets realize it is the right to sell the biggest load of crap you can get someone to accept for the highest price you can get them to pay. They don't have to buy it, and the minute they start to walk out is when you've reached your pricing limit. But ideally you find that walk-away price and charge just under it.
Conversely, think about it this way: if you opened a business and set it up with an estimated three months inventory, and on your grand opening your first customer buys out all of your stock and places orders for everything you had planned on selling for a whole year, well you'd quickly realize you didn't ask for enough money.
So, that is how pricing works in a free market. Now, lets apply this to social security. The social security trust fund is accounted for as loans to the general fund. These loans displace the need for income tax and are functionally equivalent to tax refunds. But, the loans do charge interest and the interest rate is currently under 3%. So, from a market perspective, there is a choice: pay higher income taxes or inflate the trust and accept the 3% interest rate.
Now, what is "the customer" doing? Here, the customer is the group that pays the most in income taxes and has the most to win or lose based on the tax-cut-now-3%-later scheme we call the social security trust fund. Like it or not, "the customer" is rich people.
Well, they are sending minions out to don pointy hats and demand that income taxes not be raised. Concurrently they are concocting schemes to ensure the trust fund never stops growing. In short, they are buying as much inventory (trust fund loans) as they can get their hands on.
So, like the shop-keeper that is bought out on the first day, it is time to face facts: we are not charging enough interest on the social security trust fund.
So, lets fix it. Currently, interest on new trust fund issues is fixed to average treasury debt yields. And, treasury debt yields are low and going lower. This is a boon to the federal government (which can borrow at almost-free levels) but it is crazy-low to base a $2.6T trust fund on. So, lets jack the rate up by 3%. So, that is the 'save social security' part.
But, lets also lower FICA taxes by an equivalent amount for the next four years to give workers a savings of about $322B. This is savings that they can and probably will immediately spend. So, that is the stimulus part.
Finally, lets raise income taxes by an equivalent amount as the FICA tax cut. That is the revenue-neutral part.
Put it all together and you get this (big click-able image version):
and this
This is based on the social security administrations own estimates of fund performance out to 2020. You can see that in 2020, despite the four year FICA tax cuts, the fund has $600 more in it than current plan.
A 3% hike is just a first shot. We really need to see how "the rich" respond. If they send out their minions to don pointy hats and demand that income taxes be raised, while concurrently concocting schemes to deplete the social security tax fund through lower FICA taxes, then we know we've asked for too high of a rate. Until then, turn weakness into strength and start turning them screws.
As a side note, you might think it is reckless to raise income taxes during a recession, especially during Great Recession Part II. But, here is the thing: national income is hardly down. We're not poor as a country. Trade is breaking down because trade requires two parties to exchange goods or services. It requires two parties, each of which has something the other wants or needs. When one person has everything and the other has nothing, there is nothing to trade. A gabazillionaire cannot trade with homeless people living off their food stamps because they have nothing he wants or needs. Take away their foodstamps and give them to the millionaire (aka trickle-down economics) and they have even less to barter with. It is beyond stupid and well into nefarious to promote trickle down. Until america comes to grips with reality we won't get out of the hole we're digging. But this little $300B stimulus will buy some time. So don't be afraid of the income taxes.
PS. I should also point out that the repulicans understand this. The 2% employee payroll tax cut is that Obama snuck through is re-imbursed by the general fund. It is functionally equivalent to a revenue-neutral FICA tax cut and 3.5% interest rate increase. Needless to say the republicans are fighting tooth-and-nail to kill this. After all, the $2.7 TRILLION SURPLUS is almost three years of income taxes avoided. For them, it is as simple as: Why pay income taxes when you can get social security to fund the government?