Social Security

Veronique de Rugy: One Good Reason to Extend the Payroll Tax Cut…

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Congress is now struggling with the expiration of the payroll tax cut of the past year or so. This policy shaved about 2 percentage points off the employee's FICA taxes, allowing typical households to pocket about $1,000 more a year. At year's end, though, if nothing is done, we'll all go back to paying the full 6.2 percent freight on the first $108,000 (approx.) in wages we make. That 6.2 percent, plus an equal amount that employers shell out, is supposed to pay for Social Security.

So, should the tax trim stay in place? Over at US News & World Report, Reason columnist and Mercatus Center economist Veronique de Rugy was asked to debate that question. Here's part of her answer:

Extending the cut on a temporary basis is precisely the sort of half-baked intervention that accomplishes little more than injecting even more uncertainty into an already murky economic situation. Reducing tax rates can help spur investment and job creation, but "temporary" tax cuts never have that effect precisely because producers and consumers know a change is coming soon.

Making the payroll tax cut permanent is a different story, but only if Social Security benefits are cut by the same amount as the reduction in taxes. Remember, in theory, taxes are credited to the Social Security Trust Fund, where they establish the program's authority to pay out benefits to retirees.

As de Rugy notes, the "trust fund" is raided more regularly than a monastery in medieval Ireland. There is technically a trust fund, sure, and there are technically trillions of dollars that the government is on the hook for. And there is virtually no chance that the statesmen and stateswomen currently deciding policy will actually cut current or future benefits in equal measure to foregone revenue now.

But, says de Rugy, maybe the very act of starving the Social Security fund will at least help awaken public consciousness about the flim-flam that is taking place. If Congress yet again extends the payroll tax cut without discussing cutting the benefits those taxes are supposed to pay for, writes de Rugy, this might

expose the fiction that Social Security benefits are fully backed by payroll-tax contributions, and hence, can't be reformed. Social Security is already running a cash-flow deficit, meaning there is not enough money to pay retirees' benefits. With the payroll tax cut extension adding to the program's financial difficulties, it may be the impetus for Congress to pursue fundamental entitlement reform and address the underlying drivers of our debt problem.

Her whole piece, aptly titled "A More Permanent Solution is Needed," is here. It's part of a feature called "Debate Club" and invites reader to vote up or down particular contributions. Go here to see how the various contributors are faring.

Was it really only 10 months ago when former Sen. Alan Simpson (R-Wyo.) laid it all the line regarding Social Security, Snoopy Snoopy Poop Dogg, and The Enema Man?

NEXT: The Lincoln Assassination Conspiracy (Against the Constitution)

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  1. This. Is. Too. Great.

    Beloved Rev. Blue Moon |11.29.11 @ 10:43AM|#
    The GOP was willing to extend the tax break.

    MNG|11.29.11 @ 10:44AM|#
    Cuz the GOP said they were going to oppose it even before this current tying of it to a tax increase. The original line was “it failed to stimulate” before.

    reply to this
    Beloved Rev. Blue Moon |11.29.11 @ 10:50AM|#
    Cuz the GOP said they were going to oppose it even before this current tying of it to a tax increase. The original line was “it failed to stimulate” before.
    God you are so full of shit.

    There was never, *ever* a time when this tax break extension was NOT tied to a permanent wealth tax increase.

    Whoopsadaisy!

    more than two dozen Republicans voted 78-20 to kill the $120 billion GOP alternative that would have simply extended the existing 2 percentage point payroll tax cut, financed by freezing federal workers’ pay through 2015 and reducing the government bureaucracy.

    Read more: http://www.foxnews.com/politic…..z1fQ8pdeNT

    Looks like Beloved’s Beloved GOP pulled the rug out from under him…They’ll do that, y’know?

    1. I hate reruns.

    2. Just so everyone is clear, my error was that I took Mitch McConnell and John Boenher’s position on this issue as the “GOP position.” I did not expect the GOP to actually be divided on this issue. Therefore, yes, I was wrong to view the GOP as a monolith. However, I invite the Commentariat to decide why MNG omitted some key language from his quoted paragraph:

      In a surprising result, Democrats and more than two dozen Republicans voted 78-20 to kill the $120 billion GOP alternative that would have simply extended the existing 2 percentage point payroll tax cut, financed by freezing federal workers’ pay through 2015 and reducing the government bureaucracy.

      Why do you think it is that MNG omitted those first five words? Because this outcome was a surprise to many, including me, and MNG is trying to whitewash his TEAM’s complicity in this nonsense.

      So, again, my mistake was to take GOP leadership’s positions as the position of the GOP. My bad.

      MNG is still a disingenous and petty little fucker, as you can all see.

  2. So Beloved said I was full of shit (among other ad hominems) because I suggested the GOP opposed the payroll tax cut even when not tied to a surtax on the wealthy.

    And then the GOP went out and voted against the payroll tax cut alternative offered by McConnell which had…no surtax.

    So, is Beloved going to apologize since his ad hominems rested on a premise now demonstrably false?

    Or will a “hacking” cough prevent this?

    1. He’ll apologize after you do for the 1,000 times you’ve been proven demonstrably wrong just in the year or so that I’ve been hanging around here.

      1. There’s no reason they can’t both apologize at the same time.

        1. Episiarch|3.19.11 @ 1:01PM|#

          “I give you…sixty seconds.”

          “Here it comes, Khan.”

          Fist of Etiquette|3.19.11 @ 8:16PM|#

          So there’s just nothing to go see right now.

          Considering your earlier misquoting of Wrath of Khan, I think your evening would be better spent reacquainting yourself with that film.

          Episiarch|3.19.11 @ 8:45PM|#

          What you talkin’ about, Willis?

          Fist of Etiquette|3.20.11 @ 10:34AM|#

          [The following should be read in the voice of Comic Book Guy]

          Kirk said, “It’s coming through now, Khan.” And he said, “Here it comes.” He never said, “Here it comes, Khan.”

          Episiarch|3.20.11 @ 1:44PM|#

          You need to know how things work on a starship, FoE.

          I’m still waiting for my apology.

          1. If he ever apologizes in a non-sarcastic manner, he’ll return to the 5th dimension for some fixed period of time.

            It’s his major weakness.

            Well, that, and bull semen.

          2. Here is comes, FoE:

            I’m sorry…that Michael Bay makes movies. There you go, there’s your apology.

            1. Of all the souls I’ve encountered in my travels, yours is the most… dickish.

              Have you seen this? It’s going to be better than Bad Boys 3, if that’s even possible.

              1. We tried it once your way, FoE, are you game for a rematch? FoE, I’m laughing at the “superior quoter”.

                First Shia LeBouf, now Taylor Lautner? My god, this man must be stopped. Note how he casts super milquetoast guys and super hot girls in his movies. Tailor made for his beta male audience.

        2. “1,000 times”

          Reminds me of a dirty, racist joke about a genie promising a guy that every time someone said “pardon,” the guy’s [name of body part omitted] would grow an inch. Then the guy meets a [ethnicity omitted] person who bumps into him and says, “1,000 pardons!”

      2. Demonstrate one like I’ve done here and I’ll gladly apologize.

        This is what goes on around here. I said “what’s up with the GOP opposing the payroll tax cut, I thought they liked tax cuts.” Beloved threw an apolectic accusing me, among other things, of being full of shit, disengenous, of purposefully being unfair and misrepresenting his beloved GOP’s stance. That entire vitriol dump (over a dozen posts, riddled with ad hominens) rested on his assertion that the GOP’s only opposition to the payroll tax cut was because the big, bad Dems had tied it to a tax increase.

        But of course that is demonstrably wrong, as this vote shows. So, does he have any integrity? Will he admit he was wrong, maybe apologize for building a tower of vitriol on a mistaken premise? Not only did I not “purposefully misunderstand” the position of the GOP, I got it right and he got it WRONG.

        1. We see this all the time. Someone posts a comment, and another person attacks that person as being a troll, as being disengenous, arguing the person is soooo wrong on suuuuuch an obvious thing they MUUUUUUSSST be intentionally trolling or being a hack.

          And then you know what? The point on which the person was SOOOOOOO obviously wrong turns out to be, well, fairly spot on. Of course the attacker never returns to say “shit, sorry about that, I was so sure, so misled I guess…In the future I’m going to try to be a little more critical of my own assumptions and/or what I’ve been told.” It’s just on to the next goalpost a few days later.

          Pathetic.

          1. As you know, a thorough, Jaws like review of the game film reveals no tendency in their schemes to play mea culpa.

            1. How did Scott Brown vote?

          2. What’s pathetic, is listening to you whine on, and on about a tiff you had with one person.

            1. But it’s not about one person, as my 6:22 and 6:26 posts are all about. You know, the one’s you are responding too.

              It’s a general tendency of which Beloved is a convenient example.

              I get that many libertarians are very confident in their beliefs and assumptions. Nothing wrong with that. But what happens is you get people who are so confident in them who then socially segregate into little enclaves like H&R, who only read and watch information sources they agree with, that they start to forget that the majority of their neighbors don’t believe the way they do.

              There are many posters here who get insanely upset over HAVING TO READ posts they don’t agree with, often arguing the person they don’t agree with MUST be trolling, a partisan hack, or disengenous to argue agains the OBVIOUS truths they do. That’s not just incredibly thin skinned and cowardly, it’s intellectually truncating (you get better at defending your assumptions and beliefs by examining them now and then) and more importantly, it’s stupid for a minority group which would hope to influence politics in a democracy.

              So what you end up with is a H&R that becomes little more than a circle jerk for like minded folks and the LGFers who roam onto the sites during Democratic administrations. It’s all

              “Man, can you believe those stupid statists!”

              “I know, fuck them statists”

              “I couldn’t agree more, fuck those cunts, they are all motivated by envy”

              “Indeed, fuck ’em!”

              If that’s your idea of political converstation, you’re welcome to it. Frankly, I’m tired of it. Go back to believing everyone who disagrees with you is just an evil statist fuck whom you must insult with juvenile routines. That’s worked out so well for your movement..

              1. Actually, those are very good examples, MNG… “statists… motivated by envy” describes Team Blue tax policy accurately.

    2. Not seeing the logic.

      BRBM simply states the GOP was willing to extend the tax break. You seem to be claiming that there is no ‘package’ including the payroll tax extension acceptable to the GOP. But your proof is a single vote with a pretty stupid payback mechanism – tying the hands of future Congress’ and Presidents (a nothing burger with mustard). When a majority of Dem Reps vote against Boehner’s plan does that mean they also don’t want to extend this ‘tax cut for the rich’ (how else to describe a cut that gives $2,000 to Warren Buffet, $1,000 to an average family, $500 to a minimum wage worker and $0!!!!!!! to THE POOR!!!!!)?

      1. “BRBM simply states the GOP was willing to extend the tax break.”

        Wrong. Here’s not only what he “simply states”, here is what he EXACTLY states:

        I said the GOP opposed it for reasons other than the tie to a tax raise, he said “God you are so full of shit.” because “There was never, *ever* a time when this tax break extension was NOT tied to a permanent wealth tax increase.”

        But, he was wrong. Flat wrong. Most of the GOPers in the Senate went out and opposed a version that was in NO WAY tied to tax cuts. So he called someone “full of shit”, acted all indignant, accused me of being disengenous and partisan, all based on a premise in which he was flatly, demonstrably wrong.

        But, as I said above, that’s how things usually roll around here. I’m just a statist fuck, so what do I know?

        1. I said the GOP opposed it for reasons other than the tie to a tax raise, he said “God you are so full of shit.” because “There was never, *ever* a time when this tax break extension was NOT tied to a permanent wealth tax increase.”

          Of course, you are underestimating your own role and soft-peddling your own words. You didn’t just merely observe that the GOP opposed it for other reasons; you said basically that because the GOP opposed it because of Democrats tying it to a tax increase, that meant they lurved the rich. I called you on your bullshit, and you are still full of it today.

    3. Re: MNG,

      So Beloved said I was full of shit

      There, there, honey! Did the bad man say something nasty to you? Say: Bad man! Bad man! And it will go away. There, there!

    4. Re: MNG,

      So Beloved said I was full of shit

      There, there, honey! Did the bad man say something nasty to you? Say: Bad man! Bad man! And it will go away. There, there!

  3. Here’s a better reason for extending it: it’s my fucking money, not grandpa’s, so keep your filthy gross old-peoples hands offa it!

    1. Didn’t grandpa pay SS and withholding taxes too?

      1. Yep, and it’s not my fault he was too timid/stupid to say, “Hey, it’s my fucking money, not grandpa’s, so keep your filthy gross old-peoples hands offa it!” whenever he was young, and his contributions were paying for people who were old then. But now are probably dead. Ha.

        1. Damn… fucking… skippy

      2. For much of his working life, it was likely at a rate lower than the one that’s in place for 2010.
        http://www.ssa.gov/oact/progdata/taxRates.html

  4. Wow, a Cox and Forkum toon.

    Man I miss those guys.

  5. Wait a minute, social security isn’t going to be there when I retire?

    1. I’m sorry, no. Another apology! See? I can!

      1. That was obviously a sarcastic apology. You can’t get to the 10th step until you apologize to Fist with conviction and apologize for the sarcastic apology.

        1. All right, George, all right. I’m sorry. I’m very, very sorry. I’m so sorry that I didn’t want your rather bulbous head struggling to find its way through the normal-size neck hole of my finely knit sweater.

  6. Speaking of payroll, my monocle cleaner asked for an increase of allowance for tea, sugar and beer with NO reduction in salary.

    1. Do you use dry cleaning or some kind of acid bath? Some of mine have an ultraviolet coating so I have to be careful.

        1. Damn! Them internets have the answers to EVERYTHING!

  7. For me, the worst part of the 2% cut was that it enabled politicians in Illinois (where I work, not live) to jack up their state income tax by 2%, snatching away the cut before I could see a dime. When Congress eventually revokes the cut, I’m going to see my net pay actually drop.

    Fucking thieves in Springfield…

    1. I laugh whenever I hear the term “corporate greed”. Nothing comes close to government greed.

      1. They’re not mutually exclusive.

        1. “BAIL ME OUT!”

  8. Sounds like a pretty rock solid plan to me dude.

    http://www.invisi-www.tk

    1. Sounds like a pretty rock solid plan to me dude.

      Dude, I agree with you somewhat anonbot. I think the first three items in the proposal make sense. However, the contingent liabilities could really be disastrous if incurred. I think the plan is good, but there is obvious risk. Perhaps you could elaborate what makes the plan “rock solid”?

  9. I thoroughly agree with the original blog post. The worst thing that can possibly happen with entitlements is for congress to increase payroll taxes more to fund them.

    Cutting those taxes now changes the political landscape in favor of benefit cuts instead. If the payroll tax cut become permanent, there will be huge resistance to immediately increasing it again.
    Even temporary extensions of the tax holiday will help reset everyones expectations.

  10. But, says de Rugy, maybe the very act of starving the Social Security fund will at least help awaken public consciousness about the flim-flam that is taking place.

    Yeah, maybe it will. On some blue moon.

    But this is a democracy, or a I mean a democratic republic, or a republican sort of democracy, and anyway people just vote for politicians who are then empowered to go vote for shit. Whatever kind they want.

    You don’t like the shit they voted for? What are you going to do about it?

    “Oh I’m gonna vote them out.”

    Bwahaw-ba-haw ha-haw. Yer funny. You and who’s angry blue fists?

    And even if you found enough angry little blue people (with fists) to vote them out, what makes you think the new batch is going to do any different than the old batch in congress?

    1. It’s gonna be a movement, I’m telling you, and it’s going to be way better than the Tea Party ever was.

  11. I have no idea what to make of the payroll tax cut. I think dems want it so that SS is put under pressure, so that they can get the reform they want — to make all income subject to SS tax, no cap. Repubs want the other reform — to privatize it.

    The other strange thing about the payroll tax cut is that it benefits the middle class more. A low-income person making 20k a year is only going to get $400 a year, while someone making $108,000 a year is going to get $2,160. Those making more than $108,000 a year will also get $2,160 from this credit. I would have expected the dems to do a making work pay credit where everyone gets a flat $400, but the amount is phased out if your income rises from 75k to 95k, with no credit after that. Maybe he wants support from his wealthier fan base as he knows his support from the poor fan base is shot, and no hope there.

  12. Finally – a cartoon that’s both funny and poignant!

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