Health & Fitness
Payroll Tax Holiday Reveals Social Security Fallacy
Politicians trumpet the passing of the of the Payroll Tax Holiday as a boon to the middle class. It is really should be the playing of taps for social security as we thought we knew it.
On I published a blog discussing unfunded mandates. This generated much discussion concerning the social security system. I rightfully said the system is no longer solvent and not an insurance system. I rightfully said the system cannot maintain itself on the “contributions” or taxes paid by workers and employers. Many readers challenged my assertions. President Obama and Democrats and Republicans in the Senate and House of Representatives proved me right. This past February the House and Senate both passed, and President Obama signed, a “Payroll Tax Holiday.” This ended the fallacy that social security is an insurance policy where benefits are based on the contributions of the employee and employer.
The supposed “lock-box” where “contributions “ are stored to pay benefits does not exist. The tax holiday exposed the fallacy of the link between contributions and payments. The payroll taxes reduced are the social security taxes paid by workers and their employers. The social security system no longer takes in enough “contributions” to pay benefits. Any reduction of “contributions” only makes this problem worse. A true insurance system, where benefits were tied to contributions, would require a reduction in benefits because of the reductions in contributions. This did not happen with this reduction in contributions. Money was taken from general revenues. This means we borrow Chinese money or worse just print it to pay current benefits. Our children and grandchildren will pay the bill.
This President and Democrats in Congress will tell us that the Republicans want to destroy the social security system. Let the record show that President Obama, at the urging of Democrats in the legislature, is the president who broke the bond (as fake as it is) between social security benefits and contributions. From this day forward social security benefits will be tied not to contributions but the budgetary whims of congress. Just as the two parties in Barnegat do not offer the public real choices the two national parties offer different rhetoric but no solutions. The biggest part of the problem is we, as voters, have yet to demand anything else.
