Payroll Tax Cut Extension Passes Congress

http://www.nytimes.com/2012/02/18/us/politics/congress-acts-to-extend-payroll-tax-cut-and-aid-to-jobless.html?_r=1&ref=politics

I’m glad that both parties got their shit together this time and did this without much of a fuss. It is interesting that both the most progressive of Democrats and the most conservative of Republicans opposed the measure for not dissimilar reasons:

I’d say that those are quite dissimilar reasons. Harkin is saying that separating Social Security from its dedicated income stream will weaken its moral underpinnings in people’s minds, allowing egregious blowhards like Rush Limbaugh to demagogue against Social Security and call for “reforms” that would [del]privitaze[/del] ruin it. This has been a concern among those on the left since the program was created. As FDR put it: “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”

On the other hand, tossing a bunch of money from the general fund (debt-financed, of course) over to Social Security to cover a piece of everyone’s employee contribution for the rest of 2012 seems to be the best Keynesian stimulus that’s politically feasible right now. Hopefully it doesn’t give Limbaugh and his ilk the opening to push one of their “reform” plans.

As long as we are doing what FDR did, lets cap the individual contribution at 1% at max it out at $45,000 adjusted for inflation.

http://www.ssa.gov/history/pdf/t2a3.pdf – Warning PDF

Better still, let’s do the reverse of what FDR did, and peg SS payroll tax to income just like income tax.

Or we could just get rid of the cap altogether.

“Making all earnings covered by Social Security subject to the payroll tax beginning in 2002, but retaining the current law limit for benefit computations (in effect removing the link between earnings and benefits at higher earnings levels), would eliminate the deficit. If benefits were to be paid on the additional earnings, 88 percent of the deficit would be eliminated.”

Social security is FUCKING EASY to fix, noone wants to take the heat for making wall street bankers pay social security taxes on their entire income.

Would they then receive benefits on their entire income at retirement?

Of course not. Means-test the tax, needs-test the benefits. Ability, need – Marxists were right about some things. If you can’t run a whole economy on that basis, there’s still no reason why you can’t or shouldn’t run a public retirement-and-disability-pension system on that basis.

Actually, if you paid out the benefits the entire taxed income under the current formula, it would cover 88% of the shortfall. We can balance the rest on increasing retirement age by a couple of months.

Of course you will have some wall streeters getting $50,000/month social security checks but it will make the program almost entirely solvent.