It would seem to be obvious that people who need Social Security in the future - as most of us do - would recognize that payroll taxes help "pay the freight". You remove or even reduce the amount of payroll taxes and you put Social security in an even more precarious position by defunding it. We've seen that in the past two years as the "payroll tax holiday" has amounted to a removal of $170b from the system, even as millions more beneficiaries have piled in.
The payroll tax holiday expires this year, and to hear financial mavens and economists bellyaching you'd think it was the end of the world. But maybe these elites are in such positions that they needn't worry about getting Social Security!
Case in point, this morning, finance advisor Jill Schlesinger bemoaning the loss of money from "consumers" paychecks on account of the expiration of the payroll tax holiday.
Schlesinger whined on CBS' Early Show:
"It could be the difference between you making enough money, $1,000 over the course of the year, to really pay your bills. It also could be the amount that you needed to put into your retirement account. It could be the amount you needed to pay down your credit card debt. This is a very important number for families, especially those living on the edge. I got to remind everyone, you're one of the 160 million people who work, your taxes have gone up this year."
Yes, well, duh! The point is the payroll tax holiday never should have been introduced in the first place! Like the middle class Bush tax cuts, they have only dug us deeper into a hole and made it more possible for ardent, anti-Social Security repukes to hop on their bandwagons to demand S.S. privatization or underhanded benefits' cuts via the dastardly "chained CPI". Also, like the extension of the middle class Bush tax cuts, they amounted to shameless political pandering - essentially using tax cuts as leverage to buy votes. No attention paid to the harm to Social Security and how a less firm footing makes it conceivable the program will be subject to future budget allocations. You want your S.S. benefits determined each year by the Reepo House? I don't!
Richard Eskow in a blog article ( 'The Long Game: Payroll Taxes, Hostage Taking and Social Security' ) noted:
"By proposing to expand and extend this 'holiday,' Democrats have bypassed more efficient ways to help the economy, and have once again endangered Social Security"
Schlesinger goes on:
"As employees, we pay 6.2 percent, your employer pays 6.2 percent, as well. A couple years of years ago when the economy was really fragile, one of the ways to stimulate the economy was to lower the payroll tax for employees, so it went from 6.2 percent of your earnings, down to 4.2 percent. That was awesome. It helped you get a little bit more money in your paycheck, Unfortunately, sadly, now we're back at 6.2 percent. It was not extended as part of the 'fiscal cliff' negotiations."
Sadly? Sadly there was any payroll tax holiday at all! It removed $170 b from the system and lowered its ability to cover costs of millions of new beneficiaires, many of them seeking Social Security Disability. It is not "unfortunate" we are back to 6.2% but FORTUNATE! It means we've postponed the clarion calls from the Right to change or defund the system - even when it's owed over $2.7 trillion in back IOUs!
Schlesinger then mentioned economists critical of the move, saying it may affect consumer spending.
Yeah, well - maybe a few less Starbucks lattes a week! Cheeze Louise, grow up already! Consumption infantilizes Americans anyway. Nor should consumption be expected to hold up 70% of GDP. As Benjamin Barber ('CONSUMED') observes, the entire consumer infantile ethos is what has cost us in the citizenship ethos. Rather than being wary citizens, attending to how our gov't is cutting our rights by surveillance, etc. we have been infantilized to just consume. Let's get that new computer! Let's get that new HDTV or X-box video game! We've descended into virtual babies with nappies as we've gotten toy after toy and embraced the "Gimme!" idiom. It's a damned good thing then the payroll tax expiration has tempered this nonsense.
"A lot of the economists I talk to all the time were up in arms about this because they think that this payroll tax cut was a great form of stimulus."
Up in arms? F*ck them! There's in fact no evidence, not one scintilla that the payroll tax holiday did duck squat into creating any new jobs or increasing growth. American companies continue to sit on over $2 trillion in capital, even as they farm existing jobs out overseas, then repatriate the profits - which aren't taxed at all. Want to REALLY create jobs and growth? Then end this shell game!
"And now the resumption of that 6.2 percent number means we're probably going shave about a half a percent off our growth rate this year. You think, 'Oh, a half a percent, not a big deal.' We're only growing by two percent a year so it is a big deal."
And again, this is just speculation. The long and short of it is tax cuts don't work, period! This was explored in depth in the book, 'The Tyranny of Bad Ideas'. It was also demonstrated in a Financial Times piece from 9/15/10 that examined the Bush tax cuts. The FT piece found that the era of the Bush tax cuts was "the weakest decade in U.S. postwar history for real, non-residential capital investment. Not only were the 2000s by far the weakest period but the tax cuts did not even curtail the secular slowdown in the growth of business structures. Rather the slowdown accelerated to a full decline”
The belief that tax cuts aid growth is then no more than a persistent myth, but a myth that's been reinforced by the anti-tax nuts. The true fact is that it's HIGHER taxes that generate more growth, more productivity. This only sounds counter-intuitive because too many citizens have allowed themselves to be bamboozled by the low tax narrative.
James Medoff and Andrew Harless, The Indebted Society, 1995, p. 84, 'Let Them Eat Cake', have shown that "high tax rates are associated with higher productivity growth". There is a consistent and strong relationship." By contrast, they found for the years when supply side dogma held, productivity retreated by more than 30% and debt exploded- exactly the opposite of what we've been sold.
Bottom line: People ought to applaud the reinstatement of the payroll taxes to 6.2% and just hope to hell no more such "holidays" are taken for the sake of political expedience. Your future Social Security benefits will depend on it, and as time discloses they will likely mean more to you than your 401k or other investments! Which monies can be lost with the next DOW nose dive.