Thank Your Grandma For The New iPad

Just two short years ago, the Commissioner of the Social Security Administration, issued the following dire warning concerning the future of Social Security, “In 2017 we will begin paying more in benefits than we collect in taxes.”

Faced with this reality, what did our President and members of Congress do to insure that we honored our commitment to our parents and grandparents? They temporarily (one year) cut the payroll taxes that fund Social Security in a failed effort to stimulate the economy. As a result of the tax cut and the recession, this year (not 2017) Social Security will pay more in benefits than it collects in payroll taxes. Social Security is now operating in the red.

To put things in context, the payroll tax cut saves the average family approximately $988 per year or $19 per week. The tax cut was intended to stimulate the economy by boosting consumer spending. Even though there is no objective evidence that the payroll tax cut has helped the economy to grow, neither party is willing to allow the temporary cut to expire in an election year. Republicans want to cut the budget to offset the money that the Social Security system needs to meet its obligations. The Democrats want to make up the shortfall by taxing the wealthy. Neither side seems willing to compromise which leaves two likely possibilities.

The first possibility is partisan gridlock, which will cause the tax cut to expire. This will be followed by the blame game where both parties will accuse each other of raising taxes on middle class Americans. The second possibility is that the parties agree to extend the tax cut without agreeing how to pay for it and the shortfall will be added to our yearly deficit and national debt.

Was it wise to try to stimulate the economy by raiding a system that provides a measure of financial security to seniors on fixed incomes?

To gain the perspective of a local working senior who still pays taxes, we spoke with Peg Castle, a Timonium resident and local real estate agent. Ms. Castle confessed that between working and preparing to celebrate Christmas she didn’t have a lot of extra time to follow the finer points of this debate. Ms. Castle did share the following thoughts.

“Washington gridlock is the big problem," she said. "Politics is a game where everyone is out to make everyone else look bad, but really both sides are at fault.”

When asked whether the payroll tax cut made a difference to her, Castle answered that “in tough times $19 a week means something to everybody”, but she wondered who is going to pay for it. “It’s a sad situation for the country to be so deeply in debt. I feel bad for my kids and grandkids.”

Castle’s comments made us wonder whether the politicians who passed the payroll tax cut appreciate what it is like to live on a fixed income and know that Congress and the President want to stimulate the economy by raiding Social Security.

This holiday season, when you unwrap that new Apple iPad or Kindle Fire, remember to call and thank your Grandma. It’s the least you could do. After all, some of the extra money that made the purchase possible came at the expense of the Social Security system that she is counting on.

Now tell us what you think. Is the benefit that you receive from the payroll tax cut worth the cost to Social Security? If so, should we pay for the tax cut by cutting the budget or taxing the rich?