The Republican attempts in 2011 to weaken Social Security in the name of deficit reduction were to be expected; the mixed signals of the Democrats in terms of defending it were concerning.  What saved Social Security from cuts was mobilization by organizations such as Strengthen Social Security of the public which overwhelmingly supports the program in the face of backroom Washington attempts by elites to weaken it.

For an excellent summary of the political battle to defend Social Security during 2011, go to Scott Hochberg’s article at Strengthen Social Security.

by David Welna

National Public Radio, December 7, 2011

President Obama put Congress on notice Tuesday in a speech in Osawatomie, Kan.

He said that unless a temporary payroll tax  cut is extended this month, 160 million Americans would see their taxes go up next year by an average of $1,000. But there’s concern on both sides of the  political aisle that the payroll tax holiday might be undermining the solvency  of Social Security.

Fact No. 1: Last year, for the first time  in its 75-year history, Social Security took in less money than it paid out.  Fact No. 2: This year, the first of the baby boomers reached retirement age and  began collecting Social Security benefits. Fact No. 3: The payroll tax holiday  that Congress approved a year ago reduced Social Security’s revenues this year  by $145 billion.

Obama showed no sign of being troubled by  those facts when he popped into the White House briefing room earlier this week  and called on Congress to extend the payroll tax cut for another year.

“It will help families pay their  bills, it will spur spending, it will spur hiring and it’s the right thing to  do,” Obama said.

Republicans on Capitol Hill might disagree.  Although they do not think other tax cuts should be paid for, they make an  exception when it comes to Social Security.

“Getting rid of the way we fund Social  Security through the payroll tax is a dangerous idea,” says Lamar  Alexander, the Senate’s No. 3 Republican. “Taking money from Social  Security funding is a long-term raid on solvency of Social Security.”

It’s not just Republicans raising red flags  about Social Security, either. Bernie Sanders, the Vermont Independent who  caucuses with Senate Democrats, says he agrees with Obama that middle class  families and the working poor need tax relief to weather tough economic times.

“My concern is diverting hundreds of  billions of dollars from the Social Security trust fund into that immediate tax  relief,” Sanders says. “So I would love to see tax relief, but done
in a different way.”

Charles Blahous, whom Obama appointed last  year to be one of the six trustees of Social Security and Medicare, thinks it’s  a far greater danger than most people anticipate. He too says the payroll tax  break might be harming Social Security’s long-term solvency.

“I mean, I’m a Republican and I’m a  conservative, and if you were to ask me at a first approximation, do I want  lower taxes or higher taxes, then obviously I want lower taxes,” Blahous
says. “The problem here is that I’m also a public Social Security trustee  and so I’m honor-bound to identify when this causes a change or a difficulty  for the Social Security program, which it does.”

That’s because Social Security has long been considered self-financing and thus politically immune from budget cuts.  But that could change, Blahous says, now that employees are no longer paying  their full share into Social Security due to the payroll tax holiday.

“This could be the beginning of the  end of the idea that this is an earned benefit [and] where benefits enjoy a  certain amount of political protection because of a notion that they have been paid for in the past by the beneficiaries,” he says.

There’s anxiety among Democrats as well  about the prospect of prolonging the payroll tax cut. Nancy Altman, co-director  of Social Security Works, a Washington-based advocacy group, says she’s been  alarmed to see a Democratic administration dipping into Social Security’s  revenue stream to stimulate the economy.

“Democrats were the ones that created  Social Security and the ones that were the strongest champions over its 76  years,” Altman says. “So to have a Democratic president proposing to
undo the dedicated revenue … it’s a fundamental change that supporters of the  program, I think, should oppose.”

Altman worries the payroll tax cut has  become so popular it will be hard to end it, and that’s one reason why she  opposed it in the first place.

“Many of us at the time said that it’s  no way this is just going to last one year. And sure enough, we’re back now  talking about expanding it,” she says.

Some lawmakers do say the tax break is  worrisome, including Rhode Island Democratic Sen. Sheldon Whitehouse.

“I think one more year should be about  the limit,” Whitehouse says, “because of the nature of Social  Security.”

A program that, until now, has always paid  its way.

by Steve Max

www.portside.org December 1, 2011

Yesterday I received an e-mail from MoveOn summoning me to a demonstration in support of the Obama Administration’s attempt to fundamentally restructure
Social Security and shift half of its funding into the congressional budget processes. Of course MoveOn never mentioned Social Security.  They are deceiving their members by saying
only that they support a “small but useful tax cut.”

I am sure that you too are being asked to join the campaign to restructure Social Security and I urge you not to do so. The argument that this Social Security payroll tax cut needs to be
passed as a stimulus measure is simply fraudulent. The same amount of stimulus can easily be created, as it has been in the past, by cutting the income tax for middle income people, and by making a payment similar to the earned income tax credit to those with lower incomes.

Instead of directly cutting the income tax, the Administration proposes to both extend and increase the Social Security payroll tax cut and repay the money to Social Security out of general revenue with new money from a 3.25% tax on incomes over one million dollars.

In a phone call yesterday with staff at Senator Schumer’s office, Daniele and I were told that the Democrats are taking this course because they might get Republican support
for restructuring Social Security but not for cutting the income tax. Well of course they might. The Republicans sense that this is their chance to change Social Security from the self-funding independent program that FDR set up, to one that can be largely controlled through the budget process by a majority of either house. That is assuming the Democrats will continue in the belief that allowing this tax cut to sunset is actually a tax increase, and will want to keep it on the books for years to come.

This morning it became clear that the President’s shortsighted opportunism has led the Democrats into yet another Republican trap. The Republicans have introduced
their own bill to extend the Social Security revenue cut at its present level for another year but to pay for it by freezing federal employee salaries and reducing the federal
work force by 10%. By promoting a smaller cut in Social Security revenue than the Democrats advocate, the Republicans can now masquerade as defenders of Social
Security, while still supporting a middle class tax cut and shrinking government. Pretty smart! To continue their stimulus charade, the Democrats will have to make the type
of compromise of which the Administration has been so fond.

Let us all demand that Obama and Congress end this dangerous game.

See also the posting by Social Security Trustee Charles Blahous explaining why this proposal is a bad idea.

by  Charles A. Blahous

FoxNews.com

Published September 23, 2011

http://www.foxnews.com/opinion/2011/09/23/social-security-payroll-tax-cut-temporary-stimulus-with-permanent-damage/

As a former colleague of mine has astutely observed, sometimes the most consequential policy mistakes occur because everyone is looking the other way. The President’s
latest “jobs” proposal to extend, and expand, cuts in the Social Security payroll tax is a good example. While nearly everyone has focused on the debatable efficacy of temporary
payroll tax relief as a stimulus measure, few seem to have noticed the severe problems it could create for Social Security itself.

Specifically, the proposal would accelerate a process begun last December: transforming Social Security from what it long has been – a benefit earned by worker contributions -
into an income tax based system more akin to welfare.

As a Social Security Trustee, I believe it is critical both lawmakers and the public have a greater understanding of this effect before the policy is advanced further.

The payroll tax is Social Security’s lifeblood. If it continues to be significantly cut, then only one of two things can happen:  Social Security’s insolvency is accelerated, or;
Social Security must be financed by general (read: income tax) revenues.

Either choice undercuts Social Security’s future ability to operate as it has in the past. So far, the Administration has quietly made choice #2: to convert Social Security into a general revenue-financed program.

The current payroll tax cut, enacted last December, was accompanied by a provision to funnel roughly $105 billion in general revenues into the Social Security Trust Funds. This
year’s “American Jobs Act” aims to cut payroll taxes by a further $240 billion next year alone. The proposed bill would also transfer an offsetting $240 billion in general
revenues into the program to make up for the uncollected taxes. In total, these proposals would make $345 billion of general revenue (income tax) commitments just over 2011-12
to support Social Security benefit payments.

This is not a small change; it would significantly alter the way Social Security is financed.

Consider this: in 2005, President Bush proposed that workers be permitted to invest part of their Social Security contributions in personal accounts. The Congressional Budget
Office then projected that this would result in roughly $323 billion in payroll tax revenues being redirected from the trust funds to personal accounts over the next decade;
critics decried as ruinous what was termed the “transition cost” of personal accounts.

But just two years of the payroll tax cuts proposed by the Obama Administration would shift more payroll tax revenue away from the trust funds than CBO found President Bush’s
proposal would over ten. Even more important, unlike President Bush’s proposal, none of this payroll tax cut would be saved to finance future Social Security benefit payments. The revenue would be “replaced” by new debt issued from the general government accounts.

This proposal should be provoking vigorous opposition from both ends of the political spectrum.

Progressives should oppose it because cutting the payroll tax directly undermines our ability to finance benefits (this is why 61 House Democrats wrote the President on July
21 to express firm opposition to a further payroll tax cut extension).

It also is incompatible with the progressive vision for Social Security’s future. Many progressives argue that the solution to Social Security’s shortfall is to raise taxes by
increasing the wage base subject to the payroll tax . But the case that Social Security might be rescued with significant future tax increases is fatally undermined if
elected officials conclude that the current payroll tax already is too high to sustain during a recession.

For conservatives, the primary problem isn’t cutting payroll taxes, it’s issuing general revenue transfers to the Social Security Trust Funds. Essentially, the proposal would
require that income taxes (rather than payroll taxes) must be raised in the future to redeem Social Security Trust Fund debt and to pay benefits. This would convert Social Security
into a program that requires higher income taxes to fund. It also would convert Social Security into something more like welfare, for which the funding is provided – not by
contributions from all covered workers – but preferentially from those subject to the income tax.

Choking off Social Security’s tax revenue and issuing debt in its place is a dangerously short-sighted policy that would swap, at best, a fleeting gain for potentially
devastating long-term consequences. At the very least, policymakers need to fully understand the stakes, and then ask themselves – and the public – if it’s a trade-off
they’re willing to make.

This is a condensed version of an article by Dr. Blahous previously published by e21. Please click here to view the full article.

http://www.economics21.org/commentary/jobs-bill-pretending-fund-social-security

[Charles Blahous, a senior research fellow at the Mercatus Center at George Mason University, is one of two public trustees for Social Security and Medicare.]