The Social Security Payroll Tax: Is the “Holiday” Over?

Image via iStock Photo/Nick M. Do

The approach of the Iowa Republican caucuses inspires me to think about other irredeemably bad ideas.

Among the thousands free-floating in the political atmosphere, one stands above all others as having the worst consequences for pretty much every part of the Democratic Party–with the exception of affluent, educated liberals who are now and always have been at the core of Barack Obama’s own personal coalition.

Because of a singular act of political expediency, the enactment last year of a Social Security payroll “holiday” that he now campaigns vigorously to extend and expand, Obama may go down in history as the Democrat who began dismantling the most successful and beloved of all Democratic programs.

The allegedly temporary Social Security payroll tax holiday first enacted at this time last year was always bad policy and could barely be considered good politics–it was a “concession” Obama got in rough exchange for extending the ridiculous Bush tax cuts for the wealthy. The White House as usual saw only the short-term gain from the clear boost that hundreds of extra dollars in stagnating paychecks would bring to the economy, and the political payoff he would supposedly get from being a champion of working-class people who deserved their own tax cut, too.

So Obama succeeded in doing what George W. Bush’s failed privatization scheme did not: Drain the Social Security trust fund of billions of dollars for short-term political gain.

Our Democratic president has weakened a system perennially under [false] attack for supposedly careening toward a future of insolvency.  He broke the longstanding bargain–the one at the heart of Social Security’s heretofore ironclad political support–in which workers paid directly into the system they understand will be there for them when they need it.  The rest of the federal budget may look to voters like a cesspool of waste, fraud and abuse. But Social Security, with its dedicated funding stream and annual statements to workers estimating how much their benefit will be upon retirement, does not.

People who know even the barest facts about how Social Security works, and how the system has long been walled off from larger arguments over budget and tax policy, knew the payroll tax “holiday” would not be temporary.  Tax cuts are easy to give and hard to taketh away.  And so the billions drained from the program will grow with this soon-to-be-extended “holiday.”  The program’s financing will become shakier. The right-wing arguments for egregious “reforms” of the system that in fact dismantle it will thus gain more credibility and political traction.

The Social Security payroll tax holiday was a stupid sop.  Now it’s a serious, long-term threat.

Marie Cocco is a former nationally syndicated columnist who still has opinions she’s happy to share.

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