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Payroll Tax Cuts and Sustainability

Payroll Tax Cuts and Sustainability

President Obama kicked the prone, writhing Republican majority, vigorously and repeatedly, in his speech yesterday. Obama charged that House Republicans, by rejecting the bipartisan Senate bill to continue payroll tax cuts, were raising taxes for 160 million Americans in this happy holiday season. He used the classic political trick of taking a complex issue and presenting it in personal pain terms – in this speech, the voter needing the extra money from the tax cut to pay his heating bills.

My reaction in listening to Obama was mixed. On the one hand, it was great to witness political damage to passionate climate change deniers. I was also sad because I thought the Republican dissidents were right to refuse to extend the payroll tax cut, and I knew Obama would win the fight.

The federal payroll tax goes to feed the Social Security fund, and is its primary revenue source. As a stimulus measure, Congress had previously temporarily cut the employee’s 6.25% contribution from wages to 4.25%. The old 6.25% payroll tax deduction would go back into effect January 1st without new legislation, and that reversion to the past rate is the “tax increase” Obama and other Democrats enthusiastically tortured House Speaker John Boehner and his Republican caucus about. Under intense political pressure Boehner folded and, as the Dallas Morning News headline today put it, “GOP relents on tax break.”

The payroll tax should never have been reduced in the first place, unless the tax cut were linked to enough savings to make Social Security sustainable and solvent. In my view, it was irresponsible for Congress and the President to cut the SS fund’s income by about 16% when an aging population, under current law, will dry out the fund before our children can collect any benefits whatsoever. It was also irresponsible when the federal government spends $1.40 for every $1.00 of revenue, and where headlines every day tell us what persistent spending way beyond income has done to several European countries.

The inability of our elected legislative and executive officials to behave responsibly on fiscal matters is balanced by their inability to act responsibly on big issues, ever more clearly in our faces, of environmental deterioration. Do we Americans deserve better? I hope so, but my recent 16-month campaign for Congress tells me that too many voters are like home buyers during the housing boom who signed mortgage obligations they could not reasonably expect to pay. Our elected leaders appear to reflect that part of us – an attitude of “Take what you can now that feels good, and let tomorrow take care of itself.” I do have faith that we can do better, and I know that we need to start doing so very soon.



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