Sunday, December 11, 2011

Obama's Payroll Tax Cut

When the cut was first announced, I wrote that it seemed to pose a threat to Social Security. Now, a few of the Democrats, especially Bernie Sanders, seem to be picking up on the risk to Social Security. What would have stopped Obama from making it a tax rebate in which the treasury would not have to leave the fingerprint on the Social Security system. Besides, it could be targeted to people who made under x millions of dollars a year. Of course, really smart CEOs do not have to pay the tax. They can take a one dollar salary, then cash in stock options instead.


Don Levit said...

The 2% tax cut is a minor adjustment to the trust fund considering that the entire trust principal and interest has been lent to the Treasury over the years to pay current expenses and lower the deficits.
The Treasury needs to replenish not only this year's 2% cut, but also the trillions of dollars taken from the trust fund over the years.
Also note that the way the 2% is replenished, as well as the principal and interest taken from the trust fund is the same dynamic - it must be paid with new money, AS IF THE TRUST FUND DID NOT EXIST!
Don Levit

run75441 said...


The 2% reduction comes out of revenue and backstopped by the TF to maintain payouts. While what you say is true, SS is not the culprit for the current deficits. Indeed, with the cuts in corporate and individual income taxes which have greatly benefited the 1% of the household taxpayers; SS Withholding has filled the game. Without SS Withholding; the GF would have been in trouble much sooner than now.

Bruce Webb said...

Levit a check on either Treasury's Monthly Trust Fund Reports or the parallel ones maintained by the Social Security Office of the Chief Actuary clearly show that Treasury has been paying interest on the OAS Trust Fund. And interest and principal on the DI Trust Fund without fail since those Trust Funds were established pursuant to the Social Security Amendments of 1939.

You know this full well, you also know that nobody at EconoSpeak is likely to be fooled by this same tired line of crap, why then do you persist?

All returns on any investment whatsoever represent past claims on "new money". Some people dub that "the time value of money". You continue to try to find distinctions in the case of Social Security that have no actual basis in law, current practice, or the historical record.

Are you under the illusion that a series of lightning bolts struck down Prof Rosser and me? To say nothing of the other Contributers and Commenters on this site?

At a minimum you need to retool your argument. Because repeating version 1.0 month after month and now getting to year after year is earning you nothing but ridicule.

We get it. As far as I can see nobody here agrees or is going to agree with your analytical line. So why bother?

Mitchell J. Freedman said...

Mr. Levit,

The main line from corporate media about Social Security has been for nearly 20 years: The sky is falling! Social Security is running out of money!

Then, Obama and initially the Republicans signed on to cutting revenue to the Social Security system while continuing to scream the sky is falling. That's what we're talking about. If the sky is falling, this makes it worse as it increases the money owed to the system.

Now the Republicans just oppose it because they don't want to working class folks to have any tax breaks that don't primarily benefit their well heeled donors. Amazing how they have gotten away with this one so far....But corporate media is so good at obfuscating these things. It is only comedians (Stewart, Colbert and Maher) who lay out the hypocrisy of it all...

Don Levit said...

The interest credited to the SS trust fund last year was 4.1%.
This credit was not in the form of cash, as in a savings account. Rather, it was in the form of additional (unfunded) debt. In fact, the entire principal and interest is comprised of unfunded debt.
You keep giving your opinions, and I keep citing reputable government reports to refute your opinions.
You may consider yourself an expert, but even the best teachers learn from their students.
I will take you to school from 2 governmental excerpts and links.
From a paper entitled "Analytical Perspectives, Budget of the U.S. Government, Fiscal Year 2009:"
Page 195 "At the time Social Security or Medicare redeems the debt instruments in the trust funds to pay benefits not covered by income, the Treasury will have to turn to the public capital markets to raise the funds to finance the benefits, JUST AS IF THE TRUST FUNDS HAD NEVER EXISTED."
From a paper entitled "The Impact of Social Security and Medicare on the Federal Budget:"
Page 2 "Those intragovernmental transfers, while required by law,do not affect the government's overall surplus or deficit - They augment the program's spending authority, BUT THEY ARE MERELY PAPER TRANSACTIONS AMONG GOVERNMENT ACCOUNTS, OR CREDITS FROM ONE ACCOUNT TO ANOTHER. Altogether, they amount to almost 60 percent of the cumulative 10-year surplus the Social Security trust funds.
Don Levit

Jack said...

"This credit was not in the form of cash, as in a savings account."

Levit you are proving repeatedly that you are an ignorant ass. The interest payment into your savings account isn't cash until you withdraw the funds. And then you can't be certain if the "cash" you've been given is from the funds that were in the account before the interest addition or from the interest portion. Worse yet, read carefully the title of the bills you've been given, Federal Reserve Note. Hmmm, just a note, not even exchangeable for gold or silver any longer. You can hold it in your hand, but it isn't any more a bit of money than are those electronic impulses that go from one location to another when you pay your bills on line. It's all just a promise to transfer a statement of wealth, large or small.

"...all merely paper transactions..." That's all any transfer of wealth is, and they're not even paper in most cases. As noted, the paper bills you carry in your pocket are only the Federal Reserves' promise to honor the amount in your name. What if they change their minds at the Fed and next week the bills marked $10 are now said to be worth $5? Can't be done? I still have a few bills that say that I can exchange them for silver, Silver Certificates" but I can't. The law was changed and now they're only the same promise to represent a certain value of exchange.

Don Levit said...

Do you believe that an unfunded Treasury security is as good as cash?
Your friend, Bruce Webb, thinks it is better than cash for the unfunded Treasury pays interest.
I say unfunded, for to issue the Treasury means either reducing expenses, raising revenues or increasing debt held by the public.
The last tine I spent cash I didn't have to cut expenses or raise revenues.
If you believe cash is as good as unfunded Treasuries, then I assume you believe Medicare Part D is fully funded.
As you know, 25% of the premiums are paid by participants and 75% by general revenues (probably increased debt held by the public, if there is no surplus),whicj is an immediate budget expense.
No, you can't believe that , can you?
Don Levit

Jack said...

I'll reply only to point out again that you are psersistently exhibiting your ignorance and I'd like to enhance that display. The concept of unfunded Treasury debt is internally inconsistent and, therefore, invalid. A government that can successfully issue debt which is eagerly absorbed in the global market place is never unfunded. In effect the government can continuously redefine its own debt up to the point that it can no longer find takers of that debt. That seems not to be the case even at the absurdly low interest levels that Treasury currently enjoys for newly issued debt.

You are either ignorant or deceitful. Which is it?

John said...

In the meantime every time I hear a Republican speak of protecting Social Security it's music to my ears. The "holiday" has been worth it for that if for nothing else.

Don Levit said...

I understand your thinking that government debt is funded as long as there is a willing buyer.
The point, though, is that new debt must be serviced with new monies.
Do you think that Medicare Part D was fully funded for 2011?
Don Levit