Thursday, December 16, 2010

It taxes me

So the Dimocratic majority in the Senate has capitulated - like it was ever in doubt - and given the right-wing what it most wanted: more tax freebies for the rich with the rest of us stuck with the bill. The House is widely expected to do the same and may well have already done so by the time you read this.

But while the "temporary" extension of the "temporary" tax cuts for the filthy rich, people who already have so much money they don't know what to spend it on so they wind up paying $402,000 for a fucking wristwatch, has gotten the most attention, in the longer run it may well prove to not be what is most significant - not in comparison to something that has gotten not only less attention, but too little attention, far less than it deserves. I'm referring to the payroll tax cut.

Yes, I know you heard about it and heard the arguments about how it will/won't stimulate the economy blah blah etc. etc. so forth and so on. You probably also heard about how in combination with the expiration of Making Work Pay, it means that this tax "cut" will actually raise taxes on individuals making less than $20,000 a year and couples making less than $40,000 a year.

You may have even heard about concerns that this will affect Social Security. Those concerns have been rebuffed by the White House, with Obama economic adviser Jason Furman saying it will have "absolutely no effect on the solvency of Social Security" because the proposal requires the amounts lost to be replenished from the general fund. Those concerns also have been rejected by such as Kevin "Don't Worry, Be Happy" Drum, who airily dismisses worries that this "temporary" cut will be renewed or even made permanent in two years because, he says, expected GOPper rants about "raising taxes" just "won't be very effective: "Never underestimate the power of AARP." Right. Like those rants haven't been effective this year. Or any time before.

Leaving Kevin Drum to his dreamy reverie of "We'll get 'em next time, you just wait and see," Furman's assertion is exactly the heart of the too-little-considered problem. More precisely, it doesn't resolve the problem, it points to it.

Social Security has always been funded separately from general revenue. It was done that way by design to maintain political support for it by giving future recipients a personal stake in the program. As you know, the right wing has hated the program for its entire life and over the years has looked for a variety of ways to dismantle it. Of late, one of the means of attack has been The Deficit! The Deficit! with GOPpers insisting that Social Security has to be "part of the mix" to reduce that deficit (a deficit which of course can't be reduced by raising taxes, especially not on the rich, perish the thought). The easy defense against that has been that the program, financed separately and now with a large surplus, was not contributing to the deficit. Not a penny. In fact, by investing that surplus in various government securities and bonds, it actually was helping to finance the deficit.

But with this bill, all that changes. Social Security is now to be partly financed from general revenues. Which means that to precisely that extent - $120 billion a year, according to Nancy Altman of the Strengthen Social Security campaign - Social Security does contribute to the deficit and can be attacked on that basis. This is something that has never happened before. A number of GOPpers - not surprisingly - have figured this out, as have at least some Dims even as some of those foolishly dismiss the importance of it despite those GOPpers being quite open about their intention to use this as a battering ram to break down the program.

Simply put, to the extent Social Security is financed out of general revenues, to that same extent it becomes politically vulnerable. It is utterly incomprehensible how the Obama crowd could not only embrace that, they could call the payroll tax cut a win for the White House and its Congressional minions (part of "What We Got" as compared to "What They Got") - even though it was a GOPper idea which the right directly proposed in 2009 and which had the backing of more than half the party caucus in the House.

The only alternatives I can come up with are a)the Obamites are incredibly bad negotiators or b)they knew what they were doing and Barack Obama is lying through his teeth about "protecting" Social Security and actually wants to see it slashed if not smashed.

You know things are really bad when extreme incompetence is the more comforting option.

Footnote: In his linked piece, Kevin Drum notes a survey on how people feel about the proposed tax deal and mentions that it says that a majority support the expansion of the estate tax exemption while a larger majority are against the payroll tax cut. This, being directly opposite to his own position, utterly mystifies Drum and he speculates on how people could feel that way. He offers five possibilities, one of which involves a commitment to Social Security, another of which refers to a philosophical belief you should be able to pass on to your children whatever you have built up, no matter how large - and the other three of which involve most people just being too dumb to understand what the hell is going on around them.

Y'know, I actually used to kinda like Kevin Drum, back in the days when he had his own blog; I think it was called Calpundit or something like that. Same goes for Ezra Klein when he was one of two proprietors of Pandagon. Even then I thought they were far too closely tied to the Democrats; still, they could be useful. But in each case, that was six or seven years ago and now they have positions to protect and conventional wisdom to dispense and their usefulness has long since ended.

No comments:

// I Support The Occupy Movement : banner and script by @jeffcouturer / (v1.2) document.write('
I support the OCCUPY movement
');function occupySwap(whichState){if(whichState==1){document.getElementById('occupyimg').src=""}else{document.getElementById('occupyimg').src=""}} document.write('');