Politics

Social Security payroll tax cut; bad policy made worse by bad logic

Franklin Delano Roosevelt, 1933. Lietuvių: Fra...

You're doing what to Social Security funding?

It’s nice to know I am not alone worrying about the difficulty removing the “temporary” cut in payroll taxes once ingrained in the economy. Take a look at this excerpt from a recent article in the San Francisco Chronicle:

Social Security advocates say they fear these cuts won’t be the last. It may not be any easier for Congress to allow them to lapse next year, with the elections in November and the unemployment rate projected by the Congressional Budget Office to average 8.5 percent. Forcing the government to tap further into general revenue could lead to the kind of funding fights that Social Security has avoided until now.

Representative Jerrold Nadler, a New York Democrat, said he supports extending the payroll tax cut, though reluctantly.

“To take it away would be a body blow to the economy,” said Nadler, who called the tax cut a “very bad” change in Social Security policy. So “we’ve got to live with it for another year or two.” Massachusetts Democrat Barney Frank said that while he didn’t like the tax cuts initially, it would be a “great mistake” not to continue them now.

Some critics of Obama’s proposal say their wariness stems from Social Security’s unique character. It was designed in 1935 by President Franklin Roosevelt to be an autonomous program that paid its own way through a dedicated tax.

So you see the trap, you approve something you don’t like, that’s “very bad” and then it becomes a mistake you have to live with,even though it remains bad policy. This is especially true when Congress tinkers with taxes. Increases can’t go away because they are relied upon for government spending even when they are supposed to be temporary or limited. Decreases can’t go away for the same reasons except replace “government” with taxpayer.
This is what happens when all thinking and policy setting is focused short-term or more accurately on the next election.

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Categories: Politics, Social Security

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