Originally an unenthusiastic supporter (but a supporter nonetheless) of the tax cut deal, Dean Baker has changed his mind, largely because of the threat the deal poses to Social Security.
However, after further thought and conversations with people around Washington (first and foremost, Nancy Altman, the co-director of Social Security Works), I have become convinced that this deal would be a disaster. Paul Krugman does a nice job laying out the limited benefits of the stimulus, but my greater concern is what happens to Social Security in this story. Effectively, this deal would give us a permanent two-percentage point reduction in the payroll tax in a Washington climate very hostile to Social Security.
The logic is that the tax cut is scheduled to expire in December of next year. While it would require new legislation to extend the cuts, the Republicans will describe the failure to extend the cuts as a tax increase on middle class workers. (Several Republicans have already told reporters that this would be their view.)
Democratic officeholders have had difficulty standing behind tax increases for the very richest people in the country. It is difficult to imagine them sticking their necks out for tax increases that will hit low and middle-income workers, especially in a context where unemployment is virtually certain to be above 8.0 percent and quite likely above 9.0 percent. This means that the reduction in Social Security taxes may not be for just one year, it may persist for the indefinite future....
In short, supporters of Social Security have good reason to oppose the tax deal. It is easy to have the same stimulus with an expanded version of President Obama's Making Work Pay tax cut. Supporters of Social Security should reject the latest deal and tell President Obama to stand behind his own tax cut. This is what presidents are supposed to do.
In response to these arguments, we're told "don't sweat it, the cuts are temporary." To which plenty of progressives are responding "not good enough." How could progressives have any confidence whatsoever that this president or this Democratic Senate leader will actually follow through with this promise seeing how they appear to have gotten rolled over this one? Remember, "temporary" and "tax cut" are not words that go together in Republican.