Taughannock Falls

Taughannock Falls
from: althouse.blogspot.com

Friday, December 10, 2010

Social Security is not welfare

Princeton history professor Julian Zelizer points out that the superficially attractive payroll "tax holiday," touted as a concession won from the GOP to help workers, may in fact be a dangerous paradigm shift that puts Social Security at risk.

The Social Security tax served two main political functions. The first has been to create strong ongoing support for the program from those who pay the taxes and those who receive the benefits. Social Security's contributory tax system creates perceptions of earned rights and helps distinguish the program from welfare. The tax has also made Social Security an inherently conservative program, at least from a fiscal standpoint, which has traditionally allowed many budget hawks -- like Wilbur Mills, the old Ways and Means chairman -- to support it. Unlike almost any other program, policymakers have been forced to adjust taxes to pay for the short-term obligations of government and to plan for future costs. The contrast with almost any other form of government spending, such as defense and agricultural subsidies, is striking. The design forced Congress to take the unpopular step of raising taxes and cutting benefits in 1977 and 1983 when the system faced insolvency...

By insulating the payroll tax from the perennial debates in Washington over cutting taxes to stimulate demand and investment, politicians have protected the program from short-term economic and partisan pressures.

But this time the situation appears to be different. President Obama and the congressional Republicans agreed to break with this precedent. In the future, proposals to further cut Social Security taxes -- including to do so on a permanent basis -- will certainly be on the table. Once politicians have tasted the political sweetness of tax cuts, they always come back for more. If they succeed, it will worsen the long-term budgetary challenges facing Social Security and create more room for opponents to attack. Indeed, simply by entering into a bipartisan agreement to change the way that Social Security taxes are discussed, the odds improve that one day, some politician might very well be able to scrap FDR's program.

1 comment:

mlee33 said...

Have you seen Kevin Drum's discussion of this issue? He seems to think we shouldn't worry. http://motherjones.com/kevin-drum/2010/12/payroll-tax-holiday-trojan-horse