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And rightly so.  It may be good short-term politics, but it's bad public policy and a potential long-term political headache for Democrats and progressives.

The liberal senator was unusually tough in criticizing Obama, who Harkin said would deprive the Social Security fund of roughly $100 billion by extending the two-percentage-point payroll tax cut through the end of 2012. That tax funds the Social Security trust fund.

“I never thought I would have to see the day when a Democratic president of the United States and a Democratic vice president would agree to put Social Security in this kind of jeopardy," exclaimed a visibly agitated Harkin from the Senate floor. "Never did I ever imagine a Democratic president would be the beginning of the unraveling of Social Security.”

Harkin predicted that Americans would become addicted to the payroll tax cut, which has been in place since the begiining of last year.

http://thehill.com/...

Harkin is correct.  It's bad enough that the social security trust fund is going to potentially lose $200 billion dollars in 2011 and 2012.  But who's to say it won't continue indefinitely.  Will Obama let the extension expire?  Will he back off in the face of Republican cries of a "tax hike"?  Will he veto a bill that includes an extenstion?  Will he agree to the extension in trade for something else?  

And if a Republican is elected president, you can be sure it will be extended.  And when the inevitable funding shortfall is raised, you can be sure Republicans will scream "bankrutpcy" and "personal accounts" (privatization).

It was encouraging that Tim Geithner said yesterday that he was not in favor of an extension.

http://blogs.wsj.com/...

But he's leaving soon, and Obama has not been heard from on the question.  I hope he will take a firm and clear stand in favor of expiration before the end of the year.

Originally posted to Paleo on Fri Feb 17, 2012 at 06:32 AM PST.

Also republished by Social Security Defenders.

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Comment Preferences

  •  The money gets replaced by money from the (4+ / 0-)
    Recommended by:
    Geekesque, Philpm, BasharH, Wee Mama

    general fund.

    Look for the holiday to end after the President's re-election--around 2013 or 2015 at the latest.

    "Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity." --M. L. King "You can't fix stupid" --Ron White -6.00, -5.18

    by zenbassoon on Fri Feb 17, 2012 at 06:36:29 AM PST

  •  he who speaks the truth is forced to face the (16+ / 0-)

    consequences.

    First they ignore him.
    Then, they scoff at him.
    Then they ignore him again.

    Afterwards, when he is proved right, they blame him for not convincing them earlier.

    What we call god is merely a living creature with superior technology & understanding. If their fragile egos demand prayer, they lose that superiority.

    by agnostic on Fri Feb 17, 2012 at 06:36:30 AM PST

  •  it didn't have to be this way... (0+ / 0-)

    but Republicans REFUSED to implement a teeny tiny surtax on millionaires and billionaires to pay for the SS tax holiday - because Norquist is their god.

    The payroll tax holiday boost local economies and creates jobs - and there will be NO SS funds without jobs.

    Republicans have the 1% vote locked up.

    by MartyM on Fri Feb 17, 2012 at 06:46:26 AM PST

    •  Tax cuts create deficits. Not jobs. n/t (7+ / 0-)

      ePluribus Media
      Collaboration is contagious!

      by m16eib on Fri Feb 17, 2012 at 07:40:51 AM PST

      [ Parent ]

    •  You really, really missed the point. (0+ / 0-)

      We need a lot more than a tiny increase in taxes on the Predator Class, but that's not the issue here.

      Never before in the history of our nation has Social Security contributed one thin dime to our national debt.

      Whether you pass a tiny tax on the wealthy or not, money taken out of the general fund during a time of deficit spending ads to the debt.

      Tax cuts are a piss-poor job creation mechanism.  If they worked, after Bush's childish tax slashing, we'd have no unemployment at all.

      But, they don't work.  Reagan was wrong.  As are all of his imitators.

      Including you, and our President.

      Fear is your only God.

      by JesseCW on Fri Feb 17, 2012 at 10:23:33 PM PST

      [ Parent ]

  •  Progressives can't have it both ways (2+ / 0-)
    Recommended by:
    Geekesque, Justus

    The common refrain whenever the GOP talks about the Social Security "crisis" is to (quite rightly) rage against the talking point by pointing out that SS continues to run a surplus and that we are decades upon decades away from a "crisis".

    The general fund, however, is in a bit of problem - I'm not a deficit hawk by any stretch, but we are running fairly high annual deficits and our debt/GDP ratio does need to start plateauing and falling.

    We also have a still bed-ridden economy - in recovery, yes, but fragile and with a broad-based need for consumer spending.

    Given the realities of congress - a continuation of the payroll tax cut is simply the best answer.

    The bottom line is simply that you cannot have it both ways -- the SS trust fund cannot simultaneously be healthy like a bull and not in crisis, but at the same time, unable to float the general economy 2 points for the short-term.

    You gotta pick a horse - you can't ride them both at the same time.

    Full Disclosure: I am an unpaid shill for every paranoid delusion that lurks under your bed - but more than willing to cash any checks sent my way

    by zonk on Fri Feb 17, 2012 at 06:50:27 AM PST

  •  Two things... (1+ / 0-)
    Recommended by:
    Geekesque

    1. The money is supposed to be offset so the SS Trust Fund shouldn't be losing anything.

    2.  We are still recovering from the biggest economic downturn since the great depression and there are potential storm clouds on the horizon in the Eurozone, the Middle East and elsewhere.  The Economy NEEDS MORE stimulus.  While I agree it might be better to find another way to do it, with this Congress this is the best we can do.  160 million people will have more money to spend because of this and that's a good thing in a down economy.

    Eventually we will get to real economic recovery and we can roll this back, but right now we need some Keynesian solutions here and this is best we've got.

    Frothy, Mittens, Wifeswapper and Gold Bug, surely Robert Smigel can make an animated hit out of this Clown Show.

    by Blue man in Red Land on Fri Feb 17, 2012 at 06:52:09 AM PST

    •  "supposed to be " (7+ / 0-)

      Yes, supposed to.

      •  But now we're back to the same thing (0+ / 0-)

        I said above...

        There is no vault containing the SS trust fund... rather, it's held in general debt notes.

        Again - when the whole stupid "debt crisis" talks were all the rage - the common progressive refrain was that Social Security shouldn't be a part of those discussions because it's not part of the "deficit"... and sure, technically, it's not -- it's an owner of (part of) that debt.... which means it's "supposed to be" repaid, too.

        You're (and Harkin) are arriving at the exact same place the GOP are regarding Social Security -- you came in through a different door on the diametrically opposite side of the building, but you're walking to the same point in the middle, so to speak.

        You just can't have it both ways -- either the GOP has the problem with SS wrong, or, they don't.  It doesn't matter that they arrive there from a completely opposite starting point (or that they then want to walk off into a completely different direction) -- this analysis inevitably puts you both in the same place.

        Full Disclosure: I am an unpaid shill for every paranoid delusion that lurks under your bed - but more than willing to cash any checks sent my way

        by zonk on Fri Feb 17, 2012 at 08:39:29 AM PST

        [ Parent ]

      •  Trust Fund IS being reimbursed (1+ / 0-)
        Recommended by:
        gooderservice

        Which can be confirmed by reference to the Treasury's Monthly Trust Fund Reports. There's no "supposed to be" about it, the dollars are there.

        That said Paleo is right on the bigger policy point. This was a terrible way of accomplishing the needed end, particularly as it came at the expense of the more targeted Make Work Pay tax credit. As it turns out the benefits of the Payroll Tax 'holiday' flowed disproportionately to households earning over the median, in fact many working poor households came up as net losers.

        But they don't vote in the same numbers as Obama's prime demographic which is to say the college educated people who actually still have jobs. So bad policy poorly implemented.

        Still in the cold light of day and relevant numbers the Trust Fund HAS to date been made whole.

    •  Well, there is no offset for the payroll tax cut (2+ / 0-)
      Recommended by:
      TheMomCat, JesseCW

      The unemployment benefits and doc fix are to be offset but Republicans caved a few days ago and agreed not to require an offset for the payroll tax cut.

      The most dangerous... programs, from a movement conservative's point of view, are the ones that work the best and thereby legitimize the welfare state. Krugman

      by BasharH on Fri Feb 17, 2012 at 08:08:41 AM PST

      [ Parent ]

    •  Draining the general fund to fund (0+ / 0-)

      Social Security makes Social Security vulnerable to claims that it is the cause of the debt.

      That's just not complicated.  I don't see how anyone can honestly claim they fail to see this.

      Fear is your only God.

      by JesseCW on Fri Feb 17, 2012 at 10:28:49 PM PST

      [ Parent ]

  •  It was a bad idea from the start.... (13+ / 0-)

    "But once John Boehner is sworn in as Speaker, then he’s going to have responsibilities to govern. You can’t just stand on the sidelines and be a bomb thrower." - President Obama, 12-07-2010

    by justmy2 on Fri Feb 17, 2012 at 06:52:31 AM PST

  •  The alternative is higher unemployment. (1+ / 0-)
    Recommended by:
    puakev

    Pick your poison.

    "[R]ather high-minded, if not a bit self-referential"--The Washington Post.

    by Geekesque on Fri Feb 17, 2012 at 07:01:46 AM PST

    •  There is a rather tenuous connection between (8+ / 0-)

      the cut and lower employment.  Allthough in the face of a hike in gas prices, it may be useful.  But enough to place social security in possible jeopardy?  Not to me.

      •  Long-term, yes it's tenuous at best. (2+ / 0-)
        Recommended by:
        zonk, puakev

        Short-term, rather undisputable.

        Putting more money in people's pockets is going to increase demand.

        "[R]ather high-minded, if not a bit self-referential"--The Washington Post.

        by Geekesque on Fri Feb 17, 2012 at 08:07:12 AM PST

        [ Parent ]

        •  Precisely (2+ / 0-)
          Recommended by:
          puakev, Geekesque

          This puts us in a pretty awkward musical chairs position with stool legs when it comes to the argument about the macro benefits of a UI extension.

          Either we, as progressives, have a principled and consistent set of beliefs regarding economic theory -- or -- we're making it up as we go along.

          Full Disclosure: I am an unpaid shill for every paranoid delusion that lurks under your bed - but more than willing to cash any checks sent my way

          by zonk on Fri Feb 17, 2012 at 08:47:57 AM PST

          [ Parent ]

        •  Or, it's going to pay down debt. (0+ / 0-)

          Fear is your only God.

          by JesseCW on Fri Feb 17, 2012 at 10:31:30 PM PST

          [ Parent ]

      •  Not if you believe we have a consumption problem.. (1+ / 0-)
        Recommended by:
        Geekesque

        Again - this is, or at least formerly, was a tried and true liberal argument.... It's the same one used for Unemployment Insurance - namely, that the economy needs people who are living hand-to-mouth to have money to spend.

        Hence, UI has a stimulative impact because it's going to people are going to turn around and immediately buy things like food, pay their rent, et al.

        The payroll tax cut is geared towards the exact same principle -- it's extraordinarily tilted towards putting more money directly in the pockets of the lower and middle class.

        I don't think companies are hiring because the payroll tax is lower, but I think the economy improves as people who drive consumption spend more (and which by proxy, ramps up demand, which drives production, which drives hiring).

        This has been the long-time liberal argument for UI extensions and it's one I've agreed with...

        Opposition to the payroll tax cut on other grounds doesn't undercut that argument -- but if you're going to argue the connection is "tenuous", well -- you have kicked a pretty big leg out from under the macro progressive argument made for UI extensions...

        Full Disclosure: I am an unpaid shill for every paranoid delusion that lurks under your bed - but more than willing to cash any checks sent my way

        by zonk on Fri Feb 17, 2012 at 08:45:24 AM PST

        [ Parent ]

        •  Except that it isn't (1+ / 0-)
          Recommended by:
          JesseCW

          It pits more money in the hands of the mid-upper middle class while not necessarily putting a dime in the hands of the people seeking to BECOME the working poor.

          The argument that small marginal changes in labor compensation lead to more hiring is not convincing. This is an active topic on the econoblogs and most small business owners who have weighed in dispute the idea that 2% of wage compensation savings, and wages are only part of the costs of putting new workers on the job, just doesn't have the needed impact in the absense of demand.

          This is the same type of Neo-Lib thinking that has internalized, perhaps not being conscious of it, the central tenet of Supply-Side Voodoo. That all you need to effect large scale macro outcomes is tinkering at the cost and tax margins. As opposed to more fundamental changes such as that used to introduce Social Security and federal UI to start with.

        •  Having some sense of safety in the future (0+ / 0-)

          based on a belief that SS will fund much of our retirements, that SS will be there to fund the raising of our children if we die early, has an immense stimulative effect.

          The more that is endangered, the less people spend.  

          Someone making 12,000 is getting 240 bucks a year from this bad idea.  Don't pretend it's some huge help to the working poor when it comes at the price of substantially endangering the only hope in hell they have of not dying in the traces.

          Fear is your only God.

          by JesseCW on Fri Feb 17, 2012 at 10:34:22 PM PST

          [ Parent ]

    •  Did we gain jobs when Bush implemented it? (6+ / 0-)

      Or did we bankrupt the nation AND bleed jobs?

      Tax cuts create deficits, not jobs.

      ePluribus Media
      Collaboration is contagious!

      by m16eib on Fri Feb 17, 2012 at 07:45:59 AM PST

      [ Parent ]

      •  Every economic analysis conducted (1+ / 0-)
        Recommended by:
        puakev

        over the past year says you're wrong.

        Tax cuts/increases don't have long-term effects on economic growth, but in the short term putting more spending money in people's pockets indisputably stimulates purchasing and demand for goods and services, which in turn leads to jobs.

        "[R]ather high-minded, if not a bit self-referential"--The Washington Post.

        by Geekesque on Fri Feb 17, 2012 at 08:06:38 AM PST

        [ Parent ]

    •  The alternative was targeted tax credits (1+ / 0-)
      Recommended by:
      JesseCW

      For example the holiday could have been structured so that all workers got the same dollar amount rather than a percentage that benefited the top 70-84% disproportionately.

      Yes the middle-middle and upper-middle class are part of the 99%. But that doesn't mean we needed to throw them a bigger bone than say the 20-50% got OT that this should have come at the expense of those benefiting from the Making Work Pay tax credit.

      If you have a macro-Econ argument why giving a $100,000 earner a $2000 tax break while limiting a $25,000 earner to $500 actually had more positive employment impact than a more cross the board approach or why such approaches were politically impossible than bring it. If not your explicit claim that this was an all or nothing situation is somewhere between simplistic and clueless. A false opposition.

    •  SS withholding started during the (0+ / 0-)

      Great Depression.

      Back then, people believed that even in hard times the security of their parents was something worth sacrificing for.

      We've changed a lot as a People, it seems.

      Fear is your only God.

      by JesseCW on Fri Feb 17, 2012 at 10:31:11 PM PST

      [ Parent ]

  •  Its complicated (3+ / 0-)
    Recommended by:
    Justus, zonk, wu ming

    In 1986, the Greenspan Commission's approach to planning for funding the Baby Boomers Social Security benefits involved increasing the payroll tax to create a trust fund capable of helping to fund those benefits.  However, those surpluses were used to lower the overall federal deficit and therefore allowed for lower income tax rates, especially for the wealthy.  Now, the repub's are trying to cut future social security benefits because they don't want to redeem the notes held in the social security trust fund.  Redemption willl require higher taxes.   So now, Obama has agreed to lower the social security withholding tax temporarily.  Maybe that will become permanent.   If it does, that will merely put social security back where it was pre-Greenspan.  That is social security won't be a backhanded way of funding federal deficits.   That's a change well overdue.

    •  Yup (0+ / 0-)

      Like I said, this argument dances precisely towards the same endpoint (or perhaps more accurately, middle point/decision point) that the deficit hawk conservatives dance towards, just from the completely opposite direction.

      Namely - is the SS trust fund separate from the general debt, or, are they intertwined and irrevocably tied?

      The progressive argument for the past many years has been that they are separate and should not be discussed as a "whole".  

      I think Harkin is tying to get "just a little bit pregnant" here, and you can't really do that.

      Full Disclosure: I am an unpaid shill for every paranoid delusion that lurks under your bed - but more than willing to cash any checks sent my way

      by zonk on Fri Feb 17, 2012 at 08:52:57 AM PST

      [ Parent ]

      •  Nope (1+ / 0-)
        Recommended by:
        JesseCW

        The Greenspan Commission was in 1982-83. The Trust Funds were created in their current form with the Social Security Amendments of 1939. And there were no significant Social Security surpluses prior to Reagan leaving office and certainly not in amounts that offset his tax cuts or defense build up.

        That is all the premises are factually incorrect. Widely held but wrong all the same. Which makes the analysis and policy perscriptions kind of suspect.

        The payroll tax increases put in place in 1983 were largely just advancing the dates of changes originally projected for around 1992 and 2010. As such rolling them back to 1983 levels is a non-starter. Also the whole pre funding/Reagan raid narrative is in light of actual reported numbers a double myth. If you take the trouble to look at the actual data tables.

  •  My biggest fear is that this is just part of ... (4+ / 0-)

    a triangulation scheme in which Obama trades cuts to SS for some sort of tax "reform".  His budget spelled out other parts of that triangulation scheme including cuts to the business tax rate (down to 30% from 35%).  This really angers me given that SS wasn't contributing to our fiscal troubles until Obama let it.

  •  What was wrong with the Make Work Pay tax credit (7+ / 0-)

    Nothing.
    Something that worked really well for the lower income people got broke again in favor of something that gives people who don't need it the same benefit... for the purpose of political gain.

    Here is the truth: The Earth is round; Saddam Hussein did not attack us on 9/11; Elvis is dead; Obama was born in the United States; and the climate crisis is real. It is time to act. - Al Gore

    by Burned on Fri Feb 17, 2012 at 07:28:26 AM PST

  •  two words (0+ / 0-)

    briar patch.

    this is one of those new counter-intuitive dance steps.

    I hope.

    “The most important trip you may take in life is meeting people halfway” ~ Henry Boye~

    by Terranova0 on Fri Feb 17, 2012 at 07:48:31 AM PST

  •  he is right and wrong (0+ / 0-)

    The money is being replaced by the general fund but this increases the deficit and eventually we have to raise it back.
    It should help keep the economy going in an election year but next year it has to go back up.

  •  And so the trap is laid... (0+ / 0-)

    Get Harkin, a wonderful advocate for the President, to come out with a very strong statement about a potential Social Security shortfall.  Cue Republican faux outrage and the seemingly good optics of the GOP fighting for social security (that should drive their bats hit crazy wing even more nuts).

    Then, Obama swoops in with another compromise or accommodation or whatever you want to call it this time.  If I recall, the Bush tax cuts expire in 2012 (Bye bye Bush tax cuts) and considering the Occupy movement and the Democratic Party and it's full-throated advocacy of the middle class over the ultra- super duper- oh so rich 1%, I'd think the expiration of the tax cuts will bring in enough revenue to replenish the Social Security trust fund.

    Of course, I'm talking out of my ass and I'm crazy to think that Obama has gamed this out.  Or am I?  Who knows.

    The most dangerous... programs, from a movement conservative's point of view, are the ones that work the best and thereby legitimize the welfare state. Krugman

    by BasharH on Fri Feb 17, 2012 at 08:06:19 AM PST

    •  one thing to add, they are the 'Obama' tax cuts (1+ / 0-)
      Recommended by:
      JesseCW

      Bush is long gone, and Obama's name is on the current 'tax cuts for the super wealthy' Legislation.

      without the ants the rainforest dies

      by aliasalias on Fri Feb 17, 2012 at 11:05:54 AM PST

      [ Parent ]

      •  I seem to recall some early hostage taking... (0+ / 0-)

        On this issue.

        In December [2010], Mr. Obama reached a deal with Republicans that extended the cuts at all income levels through the end of 2012 as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy. It also continued tax breaks on dividends and capital gains, and lowered the estate tax.
        It may not matter that it wasn't Obama's intention to keep these tax cuts going but they weren't extended in a vacuum nor were they extended voluntarily.

        The most dangerous... programs, from a movement conservative's point of view, are the ones that work the best and thereby legitimize the welfare state. Krugman

        by BasharH on Fri Feb 17, 2012 at 01:45:09 PM PST

        [ Parent ]

        •  those tax cuts were to expire if nothing was done (1+ / 0-)
          Recommended by:
          JesseCW

          and while unemployed got help for one year the tax cuts for the super wealthy was two years...priorites.

          without the ants the rainforest dies

          by aliasalias on Fri Feb 17, 2012 at 09:46:56 PM PST

          [ Parent ]

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