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Yes, Republicans Are Assholes, But I Can't Support The Payroll Tax Holiday...

Monkeyfister's picture
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There is no question that the Teabagged Republicans are intransigent assholes, but I cannot get my head around Democrats, Liberals and Progressives rallying around the de-funding of Social Security with this Payroll Tax Holiday.

Attaching it to the very needed Unemployment Insurance extension, and Medicare re-imbursement authorization was a recipe for disaster in the first place, with this gaggle of evil clowns controlling the House.

Here is the actual House Bill: via House.gov

You'll have one hell of a time finding half of the provisions discussed anywhere in the Media or the Blogosphere. What the House Teabaggers are all het up about is the stripping out of several of their most odious demands for all of two months.

1. They inserted a proviso that greatly weakens the Affordable Care Act: CPBB, which would throw nearly 200,000 out of coverage.

The provision in question would substantially increase the repayment charges imposed at tax time on many people who, under the health reform law, will receive subsidies to help them afford coverage during months of the year when their incomes are low but whose incomes increase later in the year because they have found a job, gotten a promotion, gotten married, or for another such reason.

2. They demanded circumvention, or neutering of EPA regulations that greatly reduce emmissions, and put strict controls on mining company effluents-- specifically Mercury and Arsenic. Of course, they cynically called this, "EPA Regulatory Relief." Fortunately, the EPA just rolled those regulations out, thus making this point nearly moot. But, of course, it only made the Teabagged House all the more adamant to get their way, today: Susie Madrak has more on this.

3. The Teabaggers also were demanding drug-testing for Unemployment Insurance applicants/recipients, which is utterly ridiculous.


So, those three pieces of the Teabagger Bill were stripped out-- for all of two months-- by the Senate, and that was enough for them to go apeshit, and, once AGAIN, threaten to destroy what is left of this economy.

But, as much as I cannot understand how the horribly unnecessary XL Pipeline, or these other provisions remotely relate to Medicare or Long-Term Unemployment, I simply cannot support the HEADLINE Payroll Tax Holiday.

Even when I was making only $20K per annum, even when I was unemployed for 18 months post-9/11, $20 in my paycheck was still of nominal value to me. It meant I drank cheap beer, and rolled my own smokes, instead of buying premium. Twenty bucks per pay period is not worth what the Teabaggers are demanding as ransom, without offering a damned thing in their so-called "negotiations."

The de-funding of Social Security should be questioned by EVERY AMERICAN from age eight to eighty.

I'd prefer the Senate get their over-paid asses back in session, split the Payroll Tax Holiday nonsense out, pass the necessary Medicare and UI extensions as a "clean" Bill for the entire year, and deal with the rest of the crap Legislation at a later date.

This is no fucking way to govern a Nation in crisis, and I am shocked that Congress retains even an 11% approval rate.

Moreover-- the Left needs to stop and give some SERIOUS thought as to just what the fuck it is championing with this Payroll Tax cut.

Fuck the lot of them, I am so goddamned pissed. I'm over 40, and dammit-- I WANT Social Security to simply EXIST in twenty years.

This shit is fucked up, and BULLSHIT.

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DCblogger's picture
Submitted by DCblogger on

FICA does not fund social security, it is just a way of transferring the tax burden from the rich to the poor. The budget of the US is a spread sheet. As I understand the bill, the Federal Government will continue to pay into workers accounts, so money will continue to accrue.

I know the people involved have ill intentions towards Social Security, but this is not defunding it.

Submitted by Alcuin on

I made the same objections that you are making over on Alternet and got roasted for it. I was accused of being a "right-wing troll", for Christ's sake!! God forbid that anyone should rain on an Obamabot's parade. The point about defunding is an important one and I have to disagree with dcblogger, whom I respect highly. As long as we are trapped into the commodity money mindset that MMT'ers are trying to pry us away from, the fact remains that the FICA tax does fund Social Security. If you look on your annual SS statement (2010 was the last year for those statements - too expensive to send them out any longer), you'll see the amount of taxes that you and your employer contributed over the years. That is money that you and your employer paid into the trust fund. The fact that the money doesn't exist in that trust fund, because the criminals that run this country have "borrowed" it to fund their wars, is immaterial. The money is owed to the trust fund. The objective of Obama and his henchmen is to reduce the funding for SS to zero and then claim that it is an entitlement that the government can no longer afford. The Republicans have been champing at the bit to get rid of SS ever since it was enacted and until Obama's election, touching SS was considered the third rail of politics: it couldn't be done. Now that a DINO has been seated on the throne, it can be done. I share your puzzlement that so few on the Left (is there a Left in this country?) don't see through Obama's ruse.

I greatly appreciate your points about why the Teapublicans rejected the bill - I didn't understand the reasons, either. But it makes perfect sense when you explained the unrelated riders that were attached to the bill.

Funding Social Security from general revenue is the road to Hell.

letsgetitdone's picture
Submitted by letsgetitdone on

if we play their game.

Please stop! I don't care what the objectives of Obama and his henchman are. I care about our goals and objectives, and we will never reach them if we reinforce their frame. We should be going at Obama for not making this a full payroll tax holiday, and adding State Revenue sharing at $1000 per person, as well as a Federal Job Guarantee at a decent wage and full fringe benefits. And when he says he can't do that because we're running out of money, we need to tell him that's BS, and that we know that he can mint a $60T proof platinum coin anytime he wants to fill the public purse and that he ought to immediately do that to pay off the national debt, stop issuing debt instruments, stop deficits, and pressure Congress to appropriate money for these programs to end the recession in 6 months.

Again, we need to get off our haunches and get a real left in this country, and that doesn't mean going after Obama because he favors a partial payroll tax, it means criticizing him for all the things he hasn't done and for his failure to end the recession in 6 months which he certainly had the power to do if he had done the right things in January 2009 like:

1. Get Harry Reid to end the cluster of procedures including and surrounding the filibuster in the Senate.

2. Stopping Congress from pressuring FASB to change the mark-to-market rule so that the big banks could claim a fictitious solvency

3. Having FDIC take the big banks into resolution, break them up, and keep them out of the political picture for a year

4. Passing the program outlined above to end the recession instead of the inadequate stimulus bill

5. And then following up with

-- a Medicare for All bill along lines of HR 676

-- a real CC reform bill limiting CC interest to 5 points over prime and

-- a real Finreg bill that restored tight regulations of the financial sector

-- and mortgage and student loan debt jubilee legislation to get rid of a lot of the private debt overhang in the economy.

These are only some of the things Obama should have done when he came into office, and do not cover his offenses against constitutional democracy itself, his violations of International Law, and his collaboration in repressing dissent. We should be holding him to account for not doing the things he should have done, not arguing with each other over whether his partial payroll tax cut creates "a slippery slope" for SS. That issue is small potatoes compared to his bigger failures to act to end the recession because, he says, "the Government is running out of money," as well as his other numerous and on-going failures as President.

Submitted by Alcuin on

I stand corrected. You are absolutely right - we need to stop being players in a game that we can't win. I never thought of the issue in the way you frame it. And I'm sure the vast majority of Americans haven't thought of it this way, either. I appreciate your taking the time to explain it, though I'm sure you are tired of doing so.

letsgetitdone's picture
Submitted by letsgetitdone on

You think the tax revenues the Government collects fund Federal spending. That's not true. In spite of the highly circular way in which we get there, public spending is ultimately attributable to money creation by the consolidated Government including the Congress, the Central Bank, and the Treasury. As long as you believe in "funding" Government spending you and many other progressives will always get this wrong and will always end up losing to the Petersonian/Hooverian deficit hawks.

To win the game you have to get out of their paradigm, because their paradigm works according to their rules and their rules ensure that they will ultimately win that game. Well, I, and many of us here, are not playing that game, and not even thinking in that paradigm anymore. We'll deny it every chance we get. We're out to kill it forever! We hope you'll join us.

letsgetitdone's picture
Submitted by letsgetitdone on

SS payments sufficient for a decent living are a right, not a privilege and not something that has to be earned. Anyone who denies that this is a right is denying old people the right to continue to live. They are scum, both immoral and Un-American, and don't deserve to be citizens of the US, because they want their fellow citizens to die quickly.

Nor is "funding" such SS payments ever an issue, since the Government can always create new money to make them. The only reason why FICA payments may be a good idea currently is to hedge against the possibility of inflation. But inflation is not a danger since our economy is only operating at 74% capacity. So, right now there should no FICA taxes. We may want to re-impose them in a more progressive way when we reach full employment again. But until then, it's better for the whole economy if we don't have them but still guarantee the SS payments for retirees provided for in the law.

Also, we may well want to increase the size of SS payments for retirees, since the Wall Street induced crash of the past few years has destroyed the private retirement resources of many, many people, and wage stagnation is preventing people from recooping. It's clear that the three-legged stool model of retirement is no longer viable. Pension assets and savings have been very much degraded through no fault of most of the people who have been victimized by the crisis. So, SS payments must take up the slack. They need to be increased by 50% immediately, and after observing the effect such an increase has on the economy, we may then want to go further and increase them again until they are double the amount of current payouts.

is that boiled down enough, CC?

Clonal Antibody's picture
Submitted by Clonal Antibody on

was by John T Harvey in the Forbes blogs - Why Social Security Cannot Go Bankrupt

It is a logical impossibility for Social Security to go bankrupt. We can voluntarily choose to suspend or eliminate the program, but it could never fail because it “ran out of money.” This belief is the result of a common error: conceptualizing Social Security from the micro (individual) rather than the macro (economy-wide) perspective. It’s not a pension fund into which you put your money when you are young and from which you draw when you are old. It’s an immediate transfer from workers today to retirees today. That’s what it has always been and that’s what it has to be–there is no other possible way for it to work.
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letsgetitdone's picture
Submitted by letsgetitdone on

I usually prefer to refer to Stephanie, or Warren or Randy, on this; but John Harvey's piece was excellent and very well put.

To this I would only add that the conservatives have been playing with the micro-macro fallacy to our detriment for a very long time. In the '80s they persuaded people that SS was going broke and that therefore all impending "solvency" problems had to be solved by collecting the money to "fund" future payouts in advance, by getting workers from 1980 on to pay twice the FICA taxes they had been paying. Most people fell for it after being guaranteed that this one-time adjustment would fix the problems forever. However, now we see that there was no problem, only the elites taking more from the rest of us by using the micro- macro- fallacy to make us think that SS was a retirement program that needed to be funded rather than a transfer payment entitlement program from some to others in the economic system.

"Liberals" fell for the trick and agreed to a "solution" to the non-existent problem favored by Alan Greenspan. That solution was favored by him and others so that taxes on the wealthy would not be raised to make those transfer payments. it was a direct scheme to take money out of our pockets so that it wouldn't be taken from the rich. And liberals and progressives fell for it then, and they're still falling for that BS now, even though we all here know that these transfer payments don't have to be "funded" at all.

Cyn's picture
Submitted by Cyn on

As part of my job, I do payroll for my boss and myself. When I first read about the payroll tax cut, it was during the time that the Cat Food Commission was working on their recommendations for cutting debt, SS, entitlement programs, etc.. I was at a loss as to how we could take money from SS, at a time when everyone's hair was on fire as to how we were going to fund SS.

I so agree with the author on this issue. There is something rotten in this administration and the MSM does an injustice to the American people when they gloss over what is really happening.

Monkeyfister's picture
Submitted by Monkeyfister on

I was beginning to think that I was the only person in America left with a long-term memory.

HOW MANY TIMES have they set their hair on fire about the dire straits of Social Security funding, and yet, here we are...

It boggles my mind how ANYONE can think this is a good idea.

Even Josh Marshall-- who TWICE has led the charge against the Anti-Social Security Bamboozlers has been snookered-up into this insane argument.

I am aghast.

--mf

tom allen's picture
Submitted by tom allen on

Extended Social Security funding cuts? Check.
Extended unemployment insurance? Check.
Extended tax cuts for millionaires? Check.
Boehner "humiliated"? Check.

Kossacks cheering a Democratic "triumph"? Check and mate.

It's getting to be a Christmas tradition. :-(

coyotecreek's picture
Submitted by coyotecreek on

My understanding is that the SS Act specifically requires that SS be self-funded. That's why we were screaming all summer that SS does not add one dime to the debt or deficit. (Except that the trust fund has been stolen by the government and now they don't want to pay it back).

This is not only a slippery slope, it's a ski jump to hell for SS. The minute the government "funds" SS (or implies that it is funding SS) is the minute it really goes on the chopping block - something Obama and his Puppet Masters have been aiming for all along.

It galls me no end that Obama "cut" the payroll tax and now everyone is calling it's reinstatement a tax increase.

letsgetitdone's picture
Submitted by letsgetitdone on

The small change in language proposed by Stephanie referenced in my longer answer to MonkeyFister takes care of the problem. Nor does the act say that SS benefits can't be paid if it's not self-funding. It's a gray area, but that's covered by the 14th. The Government can't default on it. There is no slippery slope.

That's why we were screaming all summer that SS does not add one dime to the debt or deficit.

The progressives were screaming about that all summer, and actually since early 2010, because they made the tactical error of accepting the deficit hawk framing to fight for SS. That framing only leads to losing as I argue in my comment on MonkeyFister's post.

coyotecreek's picture
Submitted by coyotecreek on

......

twig's picture
Submitted by twig on

one of the msnbc stooges was slamming the Rs for holding up the legislation, without explaining that the amount you get from SS is based on how much you pay in over the years.

My neighbor, who's on SS, said she wishes she worked longer, because she's having a terrible time living on whatever she gets. Multiply that by 100 million or so and you've got a whole lot of destitute people, which the administration is just making worse with this idiotic "tax cut."

Submitted by Fran on

low wage earners. That helped put money in the pockets of low income people, people who were working, and did not hurt Social Security. Why not just expand on that? Oh, right - the real goal is to weaken and ultimately destroy SS.

letsgetitdone's picture
Submitted by letsgetitdone on

As most of you who've read me here know, I'm not an Obamabot, but I'm telling you that the payroll tax cuts ought not to be attacked on grounds that FICA "funds" SS payments. That's just false. If it did, there would be an SSA account at the Fed that SS payments were made from.

They are not made that way. They come, instead, from the Treasury General Account (TGA) from which all Federal payments are made. The monies going into that account include FICA payments of course, but also other taxes, and proceeds from sales of debt instruments, fees, profits from the Fed rebated to Treasury every year, as well as revenues from Federal sales of products, properties, etc. and profits from coin seigniorage.

Payments come into the TGA and spending flows out it, but there is no way to show or to prove that FICA payments are used to fund any specific spending of the Federal Government including SS payments.

So, what basis does anyone here have for the claim that FICA collections "fund" SS?

Only the assumption that SS payments would not be paid if the SSA books, which now show a 2.7 Trillion surplus would one day show a negative value, and that on that day the Government would refuse to pay its legal obligations to retirees.

However, to do that the Government would have to violate its constitutional obligation specified in the 14th Amendment, section four, and very frankly, I don't see why the Government would be more likely to do that when the surplus runs out than it is likely to do it at any other time. More importantly, I don't see the legal basis for such a default, since the Government of the US as presently constituted always has the ability to pay any debt it has, however large. In effect, it would be refusing to make SS payments when it is perfectly solvent.

If the Government tried to default on SS payments and did so on grounds that the SSA accounts are negative it would face a class action suit on behalf of all retirees claiming that there are no grounds for default because the Government can record whatever number it wants to in its SSA books regardless of how high that number is, and that it can always generate the funds to pay its obligation, without the need even for further Congressional action. If it still refused to pay then there would be a revolution with millions marching on DC.

I'll refer to two previous posts of mine to show how the Government can fulfill its SS obligations regardless of the credit number in the SS books here and here.

The second of these shows that PPCS could be used to actually fill the SSA purse. The first contains other very important links, including one to a post of Stephanie Kelton's that is a great one.

Finally, I want to say how damaging I think it is that progressives like most of the commenters on this post, are implicitly reinforcing the Petersonian frame that Federal revenue is pretty much limited to what can be gathered through taxing or borrowing. That, as some of you know, and also think, is the first of Warren Mosler's "deadly innocent frauds." And the idea that SS is broken is his 4th.

So, why are you reinforcing these ideas when you know better?

Let's say we defended SS right now by opposing the payroll tax cut on grounds that it undermines future "funding" for SS, and also by arguing that 1) SS had nothing to do with the current economic crisis in the US and has not contributed to it, and 2) that the Treasury currently owes SS $2.7 Trillion and should pay that back before even thinking about failing to collect any more FICA funds, and, further, that we won this argument. Then what would we have done?

The answer is that we wouldn't have hurt the Petersonian austerity position at all, because they would simply turn around and say that since we agree that all Government spending must be "paid for" sooner or later and that our public "debt "burden" is a real problem that we must solve, then we must agree that any long-term deficit reduction plan will simply have to contain greater cuts in other areas to compensate for the idea that SS is off-limits. Thus, they will argue that we will need to take even more out of discretionary spending and other entitlements like Medicare and Medicaid then planned. We "progressives" will then respond by saying we need higher taxes from the wealthy and greater cuts in defense spending save thee programs.

Then there will be a political battle, and some "sensible" "pragmatic" people will propose a compromise with some token tax cuts for the rich, perhaps some increases in the FICA cap, some moderate cuts in defense and the really heavy cuts in Medicare, Medicaid, and other entitlements. This will be the price we pay for agreeing with them that the deficit and the debt are problems and that SS must be "funded" -- specifically, the rending of other areas of the safety net.

That is why the progressive defense strategy for SS is an example of "loser liberalism." To fight for the safety net, we must fight for the whole safety net and also for all our futures, including the rapid achievement of full employment. And to do that we must say and argue, and insist, that the neoliberal arguments for deficit reduction are wholly without foundation and an instrument of the oppression of the 99% by the 1%.

We must say that deficit reduction for its own sake is a solution to a non-existent problem and that no Government deficit spending whether for entitlements, or for anything else need be "paid for" through taxing or borrowing, and then we should talk about the Government's constitutional right and legal authority to create unlimited money in spending Congressional appropriations and paying debts when they fall due. And then we should dismiss the notion that our entitlement programs have any problem of solvency at all or ever could have, and propose, further, that they should be strengthened and broadened and not weakened.

We should answer their demand that SS be cut with a firm rejection and a demand that all student loans should be forgiven, that the retirement age be lowered to 60, that SS benefits be immediately increased by 50%, and that Medicare for All be extended to everyone and that it cover all basic health care as specified in HR 676, the Conyers-Kucinich bill. In other words, we need to use MMT to argue for what we want.

We need to come out of our defensive crouch and we need to go on the march once again, demanding what is our due -- FDR's second bill of rights! And woe be it to any so-called law maker or President or Justice of the Supreme Court who stands in our way.

Jeff W's picture
Submitted by Jeff W on

I don't get the argument.

[no-glossary]MMT[/no-glossary] says Social Security can never go broke because there's no operational constraint on the Federal government to meet all Social Security payments in a timely manner. Fair enough.

But that doesn't mean, as far as I understand, that, as between parties or interests within a fiat system, it doesn't make a difference where that money comes from or where it goes to. Making payments into some pool of funds with some expected future payout (i.e., the FICA payments) gives the payors some claim on that future payout (I mean a moral claim, not necessarily the claim they might have as beneficiaries); it's irrelevant to that claim that the Federal government could increase that pool of funds as necessary (or, alternatively, doesn't need to) to meet those claims by virtue of fiat currency, as stated by MMT.

Reducing the payroll tax reduces the claim payors have or could have for some future expected payout, given that the system calls for FICA payments at all. Again that the government could or would never default addresses a different issue—that of solvency; it doesn't address and certainly doesn't vitiate the argument for whatever claims the payors might have by virtue of paying into Social Security. (Sure, we argue against that type of pay-in/payout situation; we can say, as you do, that everyone contributes something to American society and is, therefore, “is owed a decent and dignified old age by the nation in the form of Social Security and affordable health insurance” [a way more “transactional” argument than I would make, incidentally] but that's a different point.)

There's the issue of payors paying into the Social Security system in order to keep it solvent (which is not the case, as evident from MMT) and then there's the issue of payors, having paid into Social Security, having some claim on payouts (which MMT, to my knowledge, says nothing about). (You might prefer that the basis of the claim not be specific payments [but rather some more generalized “contribution”] but I don't see that as an MMT argument, either.) So I don't get it.

Submitted by lambert on

... based on Straussian logic. Just state the moral claim.

That's what Graeber does when he points out that a debt is just a promise, so why is a promise to pay a bankster X% more important than a promise to pay out $X to a retiree?

letsgetitdone's picture
Submitted by letsgetitdone on

this is a good argument. But it doesn't hold.

It would if our FICA taxes did fund our SS payouts when we retire, and were needed to pay them out. Then if people took your money for other purposes and refused to pay what they promised when the time came for payout, you would have both a moral and a legal claim.

But right now the moral link between your pay in and your payout is through your participation, not through the precise "funding" you provide. That is, you participate and the Government promises to payout when the time comes. People who pay in more get greater payouts of course, but these payouts are in no way "covered" or "funded" by what you paid in. So, you don't have a moral claim to a specific payout based on the precise level of funding you provided.

Now I'm not saying people shouldn't participate in creating a basis for their SS payouts when they retire. But whether their pay-in should be based on flat payroll tax rates up to an arbitrarily low wage cap, or whether it should be based on their participation in a progressive tax regime that taxes wages, profits, and salaries is another matter entirely.

We can't forget that Roosevelt designed his "funding" scheme at a time when we were still, to some extent, on the gold standard. Now we have a fiat money system where tax revenues do not "fund" payouts, but mainly function to keep the currency valuable. So, why can't we just say that people's moral right to SS comes from their participation in paying taxes more generally, and that beyond that the level of their SS payouts should be determined by their right to a decent living when they retire, and the relative amounts of tax payments they've made over the years.

So, yes, I'm saying let's get rid of this regressive tax program and pay for SS out of general revenues, some of which we can create through coin seigniorage profits if necessary. And on the issue of "welfare," I say we need to stop affirming the frame by avoiding going at it directly and arguing that this or that specific benefit in the safety net isn't welfare.

We have to start talking about a decent living as a right of every American and win a political war for that standard. And we have to start saying that such a guarantee isn't "welfare"; it's the Right of any human being who lives in a nation that makes enough real wealth that it is possible for that nation to secure that right. We are such a nation. We can "afford" that standard; therefore we owe it as a moral obligation to provide it through our Government, and our people have have a moral claim based on that right. So let's stop being paralyzed by our residual and cruel Calvinism, and enforce that right!

Submitted by lambert on

And both parties are working together to make sure that elders experience shortened lifespans and fewer elders live and die in dignity.

* * *

That's separate (as lets points out) from the issue of whether payroll tax cuts defund Social Security. They do not, because the operational reality is that taxes do not "fund" governmment spending at all, as MMT teaches.

There are those who believe or at least propagate a sort of Noble Lie that the payroll tax does fund Social Security, because that belief makes Social Security harder to cut. ("I paid into it my whole life!").

First, since the Noble Lie hasn't stopped both parties continued assault, perhaps the lie isn't working so well, and new tactics are needed. Second, the left shouldn't be adopting Straussian tactics anyhow; we don't have the infrastructure to maintain them. (One advantage of the truth is that it's much more low maintenance.) Finally, one of the nice things about MMT is that it gets our stones out to the bankster's wringer; no debt is needed (or at least interesting-bearing debt to the banksters). Which is really the big picture, strategic issue here, no?

Submitted by Fran on

it is two separate issues- the desire to get rid of us, and how SS is funded.
(I think my belief in the former, clouded my thinking on the latter.)
Question: If people are not "paying into" Social Security, will that be used as an argument to cut it back later?

I guess I am answering my own question here........ I agree with both above, that we need to 1) be aggressive in arguing, not defensive, and 2) focus on the bigger picture.

In any case, this is precious little to show when half the country is struggling to manage, or even to survive.

letsgetitdone's picture
Submitted by letsgetitdone on

The war over the framing is so very important, because it will determine the ultimate fate of the safety net and whether we devolve into a society that is darwinian in Herbert Spencer's erroneous sense of the term. That society will not be a democracy. It will be a plutocracy and we are dangerously close now. To roll back the plutocracy we need to get at the power of the global elites. That means getting their banks, getting and extending our safety nets and also extending our political freedoms, which we do in part when we make our safety net stronger.

If we had people able to retire at 55, everyone's health care covered, a lower number of hours in the work week, and much higher SS benefits and minimum wages, then the 99% would be much more politically free and powerful than they are today. So, we have to understand that we're fighting a war not just for our rightful share of the real wealth produced by our economy, but also for our political freedom. We can't have democracy without greater political freedom which requires greater economic security, better education, and more free time to counterpose increased political activism to the influence on money in politics.

Monkeyfister's picture
Submitted by Monkeyfister on

Instituted to specifically fund Social Security... later, Medicare was added...

Federal Insurance Contributions Act (FICA) tax (play /?fa?k?/) is a United States payroll (or employment) tax[1] imposed by the federal government on both employees and employers to fund Social Security and Medicare[2] —federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI) ...
The Federal Insurance Contributions Act is currently codified at Title 26, Subtitle C, Chapter 21 of the United States Code.[4]

The Direct/Indirect funding argument is not valid. There is a reason that FICA and "General Fund" Withheld Income Taxes are two separate line items. They were never intended to be mixed.

Submitted by lambert on

We're talking actual operations, not line items (or intent).

Taxes don't "fund" anything.

beowulf's picture
Submitted by beowulf on

The Direct/Indirect funding argument is not valid. There is a reason that FICA and "General Fund" Withheld Income Taxes are two separate line items. They were never intended to be mixed.

This isn't about what you think or what your pay stub says (its designed that way to affect the way you think), its about how the government operates... Let's look at today's Treasury Daily Statement:


TABLE IV Federal Tax Deposits | Today Month Fiscal Year

Withheld Income and Employment Taxes $ 10,114 $ 113,207 $ 384,864

FICA and income taxes are deposited into Treasury General Account together on the same line items Treasury deposited $10 billion in employer tax withholdings yesterday and didn't bother "un-mixing" which is FICA and which is income tax. After the fact (at least monthly), employer quarterly payroll tax filings are used to estimate how much of that should be attributed to FICA.

The truth is, SS and Medicare FICA are taxes (chapter 21 of the Internal Revenue Code) and all tax receipts are deposited into Treasury General Account. The Social Security Act has a permanent appropriation for the Secretary of the Treasury to transfer from TGA into the Social Security trust funds an amount equal to “100 per centum” of SS FICA collected (there’s an equivalent section for the Medicare Part A trust fund). The reality is its "100 per centum" of Tsy's best guess.

The payroll tax cut bill amended the appropriation by ordering the Secretary to fund Social Security as if 100 per centum of FICA (the tax holiday notwithstanding) were collected, so the trust funds aren’t out a penny. Congress could set the tax holiday rate at 0% and never raise it, Social Security would continue to be fully funded.

letsgetitdone's picture
Submitted by letsgetitdone on

beowulf brings extreme clarity to the situation.

BDBlue's picture
Submitted by BDBlue on

Obama supports this because it undermines Soc Sec. I know what MMT says, but our politics don't follow MMT. What saves Soc Sec is the perception - true or not - that the people getting it, paid for it. That it is not a welfare program. If that perception changes, then it's a lot easier to gut. And yes, I know it's on the chopping block, but so far it hasn't been chopped. There's a reason for that. Just as there's a reason why they can gut Medicaid and other "welfare" programs. To me, this isn't about economics, it's about politics and the tax holiday politically weakens Soc Sec in the long run.

And yes there may be better and more progressive ways to fund Soc Sec, but that's not what this tax holiday is about and I don't for a minute believe that the people pushing this have that as a goal or that it will even be considered.

letsgetitdone's picture
Submitted by letsgetitdone on

the politics and the economics. If we share their fiscal assumptions, then the political fight is on their turf, and we are condemned to losing. I won't help older people to have their SS remain intact and their Medicare protection made even more expensive or diluted in ways that will drive them into bankruptcy through more uncovered expenses and substantial co-pays for serious illnesses.

Also it won't help poor and Middle Class Americans to have SS remain inviolate and to have discretionary programs they need and medicaid cut and to have all possibility of Medicare for All recede into the distance.

This fight is being viewed as a fight over SS. But it is not that, It is a bigger war over the meaning of fiscal sustainability and responsibility. If the deficit hawks win that fight, then they'll get more of the safety net destroyed and in the end SS too.

This is about all hanging together, or all hanging separately. I'd rather hang together and maybe win the War, rather than hanging separately and losing it.

I really have to ask what the vision is of those who defend SS on narrow grounds which share the basic deficit hawk framing of the problem? That is, if you defend SS that way, how do you expect to win the War?

And why do you think that we've had increasingly effective attacks on entitlements over the past 30 years? Do you think, maybe, it has anything to do with the fact that the Ds decided to become the party of fiscal responsibility during the Reagan Administration, because that was an easy way to attack him?

Jeff W's picture
Submitted by Jeff W on

What saves Soc Sec is the perception - true or not - that the people getting it, paid for it. That it is not a welfare program.

That's right and making that argument doesn't share the “fiscal assumptions” of the deficit hawks, as lets says.

[no-glossary]MMT[/no-glossary] says that the government can always meet its obligations to Social Security participants—broadly speaking, Social Security can't go broke. But it doesn't address whether people who make payments into some system, expecting some future payout, have a claim to those payouts, as they assuredly do—it just says that, all things being equal, the government can always make those payments.

Sure, we might want to get away from the “residual and cruel Calvinism” that says that people have pay something in to get something out—I certainly do—and, therefore, provide benefits to people having reached a certain age in accordance with some norm that “that's what a civil society does” (which, in my mind, is less Calvinist than lets rationale of “participation in paying taxes more generally”) but that says nothing about the effect, which might be devastating, of eviscerating the link between payments and the moral claim arising out of those payments. It's an argument orthogonal to that effect.

To say that that argument is to “defend SS on narrow grounds which share the basic deficit hawk framing of the problem” would be a misinterpretation of the argument. The argument is that paying with the expectation of a future payout gives rise to a claim for that future payout (and that decreasing those payments diminishes those claims). (It's why, as you suggest, Social Security has been so robust against attack and why this current situation is so threatening to Social Security.) It doesn't mean, as deficit hawks might argue, that one has to make payments in order to get payouts later or else there's a risk of insolvency (the federal government by virtue of its ability to create fiat currency could just make payments). Some people might conflate the two—that payment with expectation gives rise to a claim and that there needs to be a payment in order to have a claim—but that's their problem; it's probably not a good idea to argue policy grounds based on what others might misinterpret. Again, we can argue whether it's better to have the current situation—where payments give rise to claims for future payout or, something different— payments premised on some higher ideal or moral claim of what a civil society does—but that's a different argument.

There's nothing illogical, nothing contradictory and nothing wrong strategically, as far as I can tell, about saying, on the one hand, that (1) one would like Social Security paid out of the general revenues and (2) that payments derive from the right to a decent living when someone retires, as lets says (although I'd prefer a norm-based formulation to a rights-based one) and, on the other, that, if payouts under Social Security are premised on payments made for that purpose (as is the situation currently), one is steadfastly opposed to those payments being decreased because, obviously, it weakens one's claim to those payouts. (It might be a strategic error in the sense that one's time is better allocated elsewhere but I don't see something intrinsic in the argument that is strategically wrong.)

letsgetitdone's picture
Submitted by letsgetitdone on

Jeff,

"The argument is that paying with the expectation of a future payout gives rise to a claim for that future payout (and that decreasing those payments diminishes those claims). (It's why, as you suggest, Social Security has been so robust against attack and why this current situation is so threatening to Social Security.)"

OK. First, I don't agree that paying with the expectation of a future payout gives rise to a moral claim for that future payout, and has made SS more robust. What's made it more robust is that it's prevented a lot of poverty among the aged.

It's not the expectation that counts. It's the promise in the law that you will be paid your SS benefits when you reach 65 if you claim them that counts and that gives rise to the expectation and supports it over time. Your FICA payments are not part of a bargain. They are not voluntary. They are a compulsory tax, and you are owed nothing because you paid that tax. But, instead you are owed your payments because it's the law that you will get them at the retirement age if you claim them.

Second, that promise of payment is in no way compromised by the payroll tax cut, since the Federal Government is "marking up" the SS accounting records just as if the full payroll tax cut was collected, and it is saying that it's payroll tax cut, in no way compromises your payout rights.

Third, the idea that if people don't "pay" FICA taxes because the Government has decided it would be best for the economy if they had a holiday, then they have less of a right to their SS payout, or only a right to a lesser payout, is a pernicious, and morally bankrupt idea. We should simply deny the frame. It has no moral basis in anything but obsessive Calvinism, and in a fiat money system this claim can't be justified since the Government doesn't need or use their money to make its promised payments.

And Fourth, of course the idea that your payment in, is tightly coupled to getting a payment out, is a deficit hawk idea. Because why would it be coupled to it unless your money was needed to somehow "fund" your later payout, or someone else's current payout, which is the basic deficit hawk frame? Everything must be 'funded" sooner or later by paying for it from funds that already exist and are "owned" by other people, the way gold is owned owned today.

If we borrow today, we will pay the price tomorrow or our grandchildren will. What else is this if not "deficit hawkism?" And what are you doing above except feeding the deficit hawk frame.

To not feed that frame you have to say that SS payments are a right and that since we have a fiat money system, they do not have to be "funded" out of existing monetary resources for the Government to be able to make them. There isn't any other alternative. Any other formulation only feeds their frame and is in conflict with a progressive victory in the broader fight.

coyotecreek's picture
Submitted by coyotecreek on

Perception is very important.

And letsgetitdone is right, too.

The problem is that unless MMT can be more easily explained you will never achieve your goal. I have waded through every post on MMT and even today am reading more explanations of it.

Maybe there has been 30 years of attacks on entitlements - but I do not see MMT - as it is currently having to be explained - changing those perceptions. At least not in my lifetime.

Shit - we can barely convince people that there is something wrong with the Obama administration........

Submitted by Alcuin on

"Shit - we can barely convince people that there is something wrong with the Obama administration........"

Smile. Let's go storm the walls of the "progressive gatekeepers"!

letsgetitdone's picture
Submitted by letsgetitdone on

All the real people I talk to are unhappy with Obama. I encounter the Obamabots online, but not in real life. It is true that real people like the R alternatives even less than O, and that they've not heard of many or sometimes even any third party candidates, but, still, they do think that there's a lot wrong with the Obama Administration, and as OWS grows they'll find out more and more.

As for MMT, it is making progress. Here's Randy's recent piece. And here's progress with John Carney of CNBC. And here's Mike Norman yelping joyously.

MMT is making progress. In Ireland, on the Continent, even here among some opinion leaders in economics.

As for not being able to communicate it clearly, I don't know if I agree with this either. Wray, Kelton, Tcherneva, and Mosler are admirably clear communicators about how things really work in the fiscal area. Mike Norman, Marshall Auerback, and Cullen Roche are also often very good.

So, I don't think the problem is really communication. I think it's just breaking through the MSM communication layers so we can get the paradigm spread around. We're beginning to do that now, and no one knows how fast it can move in the context of the OWS Spring coming up before you know it.

Submitted by Alcuin on

Joe, you've made some points that are really valuable. That's what I like so much about Corrente - reasonable discussions and bantering back and forth without vicious attacks. I guess what I'd like to ask is this: what is the logic of Obama's attack on SS? I mean, if his objective is to provide middle-class tax relief (which I seriously doubt), then why does he select the "third rail" to touch to provide that relief? While I have a vague understanding of MMT and appreciate the fact that we no longer have a commodity based monetary system, that doesn't mean that any more than a tiny minority of Americans understand that, too. I'm an artist - sometimes I sure wish that my mind worked better with logic and numbers!

"If we had people able to retire at 55, everyone's health care covered, a lower number of hours in the work week, and much higher SS benefits and minimum wages, then the 99% would be much more politically free and powerful than they are today."

Which is precisely why it won't happen. Such proposals will be greeted with consternation by the vast majority of Americans. It upsets every apple cart that ever existed. I'm afraid that we are stuck with a commodity-based monetary mindset for a good long time.

letsgetitdone's picture
Submitted by letsgetitdone on

Alcuin, we need to make those proposals, keep making them, and never give up pushing them, that's the lesson we need to learn from the right-wing nut-jobs. After hearing ideas again and again, people begin to think about them, and the more they think about them the better our chances are of persuading them to our side. What we want is right and we can never let pragmatism and short-run considerations stop us from advocacy and destroy the now.excitement of our ideas. It's because we've done this over the past 30-40 years that we are in the sorry state we are in now.

There must be an end to this. We must advocate for what we want and fight for it, and never move backwards only forwards. We can compromise when we can't get it all; but no compromise that moves us backwards ever. No compromise that doesn't involve at least some retreat for the corporatists, or the misogynists, or the "greedy bastards" who are trying to get to 'die quickly."

This business of settling for no cuts to SS while giving up many other things in return has got to stop. For the last 30-40 years the 1% have increasingly taken from the 99%. Now it's time to take it back and much more than that to institutionalize a society that is responsive to the 99% for good.

Submitted by Alcuin on

I surely agree with you, Joe. It's just that MMT is a huge leap for me - being immersed in deficit hawk arguments for so many years is hard to get clear from. As it is for so many other people. But yes, you are right - we have to keep hammering away at this. I do have to disagree with your comment about running into Obamabots in real life, though. I run into them every day and I think that I might be accused of being a bit of an Obamabot for falling for the deficit hawk ideas that you so clearly pointed out. It's really hard to accept new ways of looking at the world, isn't it?

MMT is slowly penetrating the larger world, as you say, but it's going to take a long time to get down to the "man on the street". I can't tell you how often I hear people swear about (and at!) recent immigrants who are "getting benefits that they haven't paid for". It seems as though the deficit hawk idea neatly meshes with so many other characteristics of Americans: personal responsibility, the Horatio Alger myth, worship of individualism ... the whole universe of ideas that Morris Berman, in A Question of Values, rails about.

Perhaps the whole doggone system has to crash, like it did in the Great Depression, before people stop and say to themselves, "this just isn't right. We need to do things differently." Espousing MMT ideas will contribute to that needed dialog.

letsgetitdone's picture
Submitted by letsgetitdone on

Sometimes I look at US history as a system that self-organized around a basic state comprised of unrestrained individualism, competition, greed, and economic domination of the environment and other people in the midst of insistence on individual liberty, a rough kind of anti-humanist equality, and bursts of collaborative efforts to fix excesses. The problem is that such a system is unsustainable.

The emphasis on both freedom and equality conflicts with the emphasis on unrestrained individualism, greed, competition, and domination, so the system lurches from one cluster of attributes to the other throughout its history. In the 1930s the basic state of American history, amoral individualism, was disturbed by the Great Depression, and people started acting and thinking differently. Individualism was eclipsed by the need for collective action.

The trend was deepened by WWII, and the post-war return to the basic state was interrupted by the beginning of the Cold War, and all its subsidiary events including Korea and Vietnam and the building of the American Empire. But amoral individualism was always lurking below the surface, and with the revulsion against the Federal Government due to the Vietnam War, the failure of the anti-poverty program, the emergence of the hippie and yuppie movements, and Watergate, it made a comeback in the 1970s. And with the failed presidency of Jimmy Carter, a very nice man without a political clue, Ronald Reagan with his bevy of supply siders, and Randians became the embodiment of the resurgence of amoral individualism.

It's dominance was greatly aided by the lack of historical consciouness in America, and our penchant for forgetting lessons learned. It was also helped by the distortion of Keynesianism economics, and the weird evolution of some Keynesian theory away from macroeconomics and into an emphasis on microeconomics creating neoliberalism, which at the practical level renewed classical unregulated free market economic policy. Very soon after Nixon said we're all Keynesians now, Jimmy Carter seemed to forget Keynes and begin the embrace of neoliberalism. Reagan deepened that, and all presidents since have had their thinking dominated by it.

We've now lived under that regime for more than 30 years, and its policy prescriptions have led to growing inequality, disaster for the middle class, and then to austerity programs which promise to bring us back to the 30s again all over the world. Fascism is rising, free speech movements are meeting with repression and the future is uncertain.

At this juncture we don't know whether global feudalism will be our fate or whether populist movements can renew democracy. I dare say we'll find out over the next decade, and, in particular, whether the love of liberty and equality in America is strong enough stop the march along the real road to serfdom.

Submitted by Alcuin on

There is quite a literature exploring this topic, Joe. Charles Derber has written an excellent book, called The Wilding of America and Morris Berman has written a series of books that are rather bitter in tone (Dark Ages America, A Question of Values and others). Then, of course, there is the classic, Bowling Alone, by Robert Putnam. I do think that a deeper familiarity with this subject is quite helpful in understanding so many events in American history. It certainly explains the attraction of Rand to so many.