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The dual budget and jobs deficits dominating discussion in Washington has put Social Security front and center this week.  While Republican heart-throb Marco Rubio claimed the retirement program is among those which "weakened us a people," his GOP colleagues opposed President Obama's call to extend the payroll tax holiday for another year.  Meanwhile, Vermont Senator Bernie Sanders proposed raising the income cap on payroll taxes from $106,800 to those making over $250,000 a year to help ensure Social Security's financial future for generations to come.

Sanders and Obama are both right.  That's why their proposals should be combined to guarantee that future Social Security recipients can count on the same kinds of benefits that helped people like their grandparents.  People, that is, like Ayn Rand and Paul Ryan.

Back in December, President Obama and Congressional Republicans agreed to an $800 billion package which included an extension of the expiring upper class Bush tax cuts and a one-year, two percent cut in federal payroll taxes.  But with a temporary middle tax cut saving American families earning $50,000 a year about $1,000 set to end on January 1, the Republicans' old sound bite about a "looming tax hike" has conveniently disappeared.  As the AP explained:

News flash: Congressional Republicans want to raise your taxes.

Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?

Apparently not.

As a spokesman for House Majority Leader Eric Cantor (R-VA) put it, "All tax relief is not created equal."  Echoing that new talking point was Texas Republican and debt super committeeman Jeb Hensarling, who announced that:

"It's always a net positive to let taxpayers keep more of what they earn, but not all tax relief is created equal for the purposes of helping to get the economy moving again."

Of course, a more fitting description of the GOP position might be that some taxpayers are more equal than others.  After all, extending the Bush tax cuts for the top 2 percent of earners cost the Treasury roughly $70 billion a year.  And as the New York Times explained Thursday, the payroll tax cut Democrats are hoping to continue to help boost the economy would produce a very similar deficit impact next year:

Lower- and middle-income workers are the greatest beneficiaries of the tax cut. The cut resulted in $67.2 billion of lost revenue for Social Security in 2011 and a total cost of $111.7 billion spread over 10 years.

Which is why Senator Sanders' proposed "Keep Social Security Promises Act" is so important.  It would not merely keep America's promise to 53 million Social Security recipients, it would keep candidate Obama's 2008 pledge to enhance the program's solvency through the exact same funding mechanism Sanders advocated this week:

To keep Social Security strong for another 75 years, Sanders' legislation would apply the same payroll tax already paid by more than nine out of 10 Americans to those with incomes over $250,000 a year...Under Sanders' legislation, Social Security benefits would be untouched. The system would be fully funded by making the wealthiest Americans pay the same payroll tax already assessed on those with incomes up to $106,800 a year. The idea follows through on a proposal that President Obama made when he was running for office in 2008.

So-called deficit hawks should be thrilled.  Citizens for Tax Justice and the New York Times each estimated that extending the payroll tax to income over $250,000 a year would deliver about $50 billion annually in new revenue for the Treasury.  And as the Times explained in November, the move is long overdue:

When the payroll tax - which finances Social Security and Medicare - was created, it covered 90 percent of all income. Today, with a ceiling at $106,800, it covers closer to 80 percent.

As Sanders rightly noted, Social Security "not contributed one dime to the federal deficit. It has a $2.5 trillion surplus, and it can pay out every nickel owed to every eligible American for at least the next 25 years, according to the Social Security Administration."  But his legislation would ensure the program is there for recipients in the future as it was in the past for the its critics like Paul Ryan and Ayn Rand.

As a Wisconsin right-wing think tank noted, "With his father's passing, young Paul collected Social Security benefits until age 18, which he put away for college."  And Ayn Rand, Ryan's ideological godmother, similarly depended on the programs Marco Rubio said "weakened us as a people":

Critics of Social Security and Medicare frequently invoke the words and ideals of author and philosopher Ayn Rand, one of the fiercest critics of federal insurance programs. But a little-known fact is that Ayn Rand herself collected Social Security. She may also have received Medicare benefits.

An interview recently surfaced that was conducted in 1998 by the Ayn Rand Institute with a social worker who says she helped Rand and her husband, Frank O'Connor, sign up for Social Security and Medicare in 1974.

So let's pass the payroll tax cut extension and the increase in the income cap.  Call it the Ayn Rand Social Security Protection Act.  To guarantee the retirement security of future Ayns in perpetuity, the wealthiest Americans need only contribute $50 billion a year.  That's a small price to pay to Go Galt.

* Crossposted at Perrspectives *

UPDATE:  The post has been updated to reflect corrections on Bernie Sanders' proposal provided by blue aardvark and sleipner in the comments.  Hat tip for catching the error.

Originally posted to Jon Perr on Fri Aug 26, 2011 at 11:07 AM PDT.

Also republished by Social Security Defenders.

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Comment Preferences

  •  Error detected (4+ / 0-)

    Bernie Sanders did NOT propose raising the cap from $107k to $250k.

    He proposed raising the cap to infinity and beyond, except for incomes in the range $107K < income < $250K. There may be one or more equals in the inequality expression, but that's details.

    In theory, there is no difference between theory and practice; but in practice, there always is a difference. - Yogi Berra

    by blue aardvark on Fri Aug 26, 2011 at 11:18:05 AM PDT

  •  Why Cut Payroll Deduction for Social Security? (3+ / 0-)
    Recommended by:
    Bruce Webb, radmul, Bluefin

    When many other sources of stimulus are available, why mess with something that works?  I have no problem with raising the cap, but there is no good that will come from changing the funding for Social Security.

    Historians like Nancy Altman say:

    Sixty members of the Senate are unwilling to raise taxes evenon those earning over $1 million. Given that unwillingness to raise taxes by less than a nickel on every dollar earned over $1 million, I find it unfathomable that a more conservative Congress, in two years, heading toward an election, will increase the payroll tax by 2 percent on the very first dollar, and every other dollar up to the cap, earned by virtually every single worker in the country. This would amount to a 30 percent tax hike on what workers would have then been paying. Consequently, I think we have to assume that the payroll tax holiday will be extended beyond the two years the president is proposing and quite likely could become permanent.

    That means that the federal government will have to continue to transfer $120 billion to the Social Security trust funds each and every year even as it has to transfer more and more interest payments as the trust funds continue to grow and as interest rates return to more normal levels. Unless Congress acts to restore Social Security to solvency, the Treasury bonds held in trust will have to be redeemed, again on top of that new $120 billion transfer from the general fund, starting fifteen years from now, assuming Congress even continues to make the $120 billion every year before that point. These dollars will be competing with dollars for defense, environmental protection, education, school lunches, Food Stamps, Medicare, Medicaid, SSI, Pell grants for low income college students, and every other good and service financed by the federal government.

    A permanent two percent cut in Social Security contributions doubles the 75 year projected shortfall. Scrapping the cap (eliminating the $106,800 maximum on earnings), tonally eliminates the shortfall today. If FICA is cut by 2 percent, scrapping the cap gets Social Security only halfway there.

    A little research will show this is a very bad idea, even if POTUS Obama likes it!

  •  Correction on Bernie's SocSec proposal (1+ / 0-)
    Recommended by:
    Avenging Angel

    He's not raising cap to $250k, he's changing it so all income above $250k is subject to the same tax as income below $106,800.  Income between $106,800 and $250k would be exempt.

    At least that was my read on it yesterday.

    New favorite put-down: S/he's as dumb as a flock of Sarah Palins

    by sleipner on Fri Aug 26, 2011 at 12:13:45 PM PDT

  •  THATS A GREAT IDEA!! (0+ / 0-)

    Indeed, call it that. No better way to publisize the hypocricy of Ayn Rand and to forever lay to waste the influence of her stupid "ideas" (can you even call them that?).

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