How Not To Save Social Security

Amid the swirling "debate" underway on the distant planet Beltway [located just a kick away from Uranus] on the topics of debt and deficits, Social Security drifts like a rudderless ship in hostile seas.

An easy target for talking point fabricators and creative statisticians, it sustains attacks at every level, from its very conception to its current benefit structure. It is portrayed as the elephant in the room, or perhaps the sacred cow, or maybe a giant leach. So many economic problems would go away if only we could solve Social Security - or is it that we can avoid addressing so many economic problems since we have this behemoth sucking up all our problem-solving resources?

Suggestions for reform, if you concede the need for reform, range from privatization to full funding, with a panoply of tweaks, means-tests and various actuarial adjustments in between. Of course every proposal from any source immediately becomes a catalyst for severe exothermic reaction in the oxygen depleted Beltway atmosphere. I think I just felt a little kick down there.

One element of last year's Bush-era-tax-cut-extension compromise was lowering payroll taxes on employees by two percent, for one year. I think this was conceived as a trade-off for extending Bush-era tax cuts for the wealthy. What seems merely a typically asymmetric exchange of benefit across the range of incomes, its connection to the Social Security problem is not readily apparent.

Payroll taxes are collected in a kind of smoke-and-mirrors way, supposedly splitting the contribution between employer and employee, but the destination for all of the funds is Social Security. By lowering the withholding by two percent, we get a larger paycheck, but the money comes at the expense of Social Security, which is already projected to run short of its benefit obligations, somewhere between three weeks and forty-two years into the future, depending on who's making the speech.

I didn't hear any discussion of this during last Fall's tax bill negotiations, but I expect we will; if its effect on Social Security's fiscal health becomes apparent. Conservatives will use it as further proof of Social Security's unsustainability, while liberals will wonder how this all came to be. Especially if, as has been proposed, the payroll tax "holiday" is renewed every year, and possibly even extended to the "employer's share." This last would yet more quickly deplete Social Security, but without even the modest boost in our paychecks.

That's not my idea of a stimulus - it seems more like "starving the beast."