At
Columbia Journalism Review, editor Trudy Lieberman
writes that however much the traditional media loves the whole Rick Perry-Social Security side-show is, there's some pretty serious stuff they could be exploring when it comes to Social Security, specifically, the longer-term implications of President Obama's calls for an extension and broadening of the payroll tax cut.
What’s missing are stories explaining, as Nelson tried to do, that there could be long-term consequences tied to reducing the payroll tax. “The Ponzi scheme is a sideshow. It’s an outrageous claim designed to undermine confidence in the program,” says Nancy Altman, co-director of Strengthen Social Security, a progressive group trying to save the program. Altman knows her onions when it comes to Social Security, having assisted Alan Greenspan, who headed a bipartisan commission in 1983 that put Social Security on a sound financing footing. Altman wasn’t keen on the payroll tax holiday agreed to last December, telling NPR that this “could eventually lead to the unraveling of Social Security.” If Republicans make this permanent, it could spell real trouble for Social Security, she said.
I asked Altman if she had changed her mind. Nope, she hadn’t, and discussed the red flags that the public and the press should think about as another payroll tax cut zooms through Congress. The payroll tax cut now in effect reduced the amount of contributions employees pay from 6.2 percent to 4.2 percent, and left in place employers’ contributions, also 6.2 percent. This time around the president is proposing that workers pay a payroll tax of only 3.1 percent—a fifty percent reduction from the 6.2 percent rate that has been in effect for two decades. Employers would also be relieved of making payroll contributions on the first $5 million of their payroll, a move targeted at small employers.
Altman says these cuts would not be a big deal if they were temporary, but she believes they’ll stick around. “Congress has been reluctant to increase marginal tax rates by a modest amount on the very wealthiest Americans; it’s hard to believe they would be eager to allow Social Security contributions to double on the lowest-income, working Americans,” she said.
And that's a problem. The losses to the Social Security fund from payroll tax cuts passed in December has been offset by general fund revenues, and presumably (should Republicans end their opposition to this tax cut) any expansion or extension of the cuts would be done the same way. There's potential danger in that financing solution for Social Security, and it is pretty huge:
If the government must dip into general revenues permanently to make the trust funds whole, then Social Security will contribute to the deficit, and may be in jeopardy, since the government has to borrow money to cover its debt. Right now Social Security does not contribute to the deficit, a point the president himself has made. “Too many Americans believe that their elected representatives have been stealing from Social Security,” said Altman. “This reinforces that perception. These are pension funds, not general taxes, and should not be cut to stimulate the economy or used for any purpose other than Social Security.”
There are other effective ways to provide some relief to middle class workers who are struggling, including Altman's suggestions of "a one-time increase in food stamp payments, or an income tax break like the now-expired 'Making Work Pay' tax credit part of the stimulus package that put more money into the pockets of working Americans."
Social Security is the nation's most successful program for a good reason: it's worked and worked well for three-quarters of a century, raising generations of Americans out of poverty and making a lifetime of work show for something solid: security. That security has come from the brilliant structure of the program—we all contribute, we all benefit, we all have a stake and the money we contribute is ours; it's guaranteed that we get in back when we need it. It's worked for all these years; there's no reason smart people who want to keep the program strong can't make it work for another 75 without undermining its basic structure.