In GOP’s alternative world, Social Security is part of overall budget and not in a special trust

The banter between Republicans and Democrats on extending the temporary cut on the Social Security tax continues to take place in an alternative universe.

In the real world, cutting a program that is part of the budget doesn’t offset a temporary decrease in the Social Security tax, since Social Security is administered by a special trust which loans money to the federal government. A cut in the budget only cuts the amount of money the federal government has to borrow from Social Security. The government will eventually have to pay it all back, no matter what.  That is, unless the rightwing has its way and the U.S. defaults on its financial obligation to repay the Social Security Trust Fund.

The original beauty of putting more money into consumers’ hands by cutting the Social Security tax rate temporarily was that as long as the federal government pays back what it owes the Social Security Administration, Social Security is safely financed for a long time, with no real problem until 2037 if current trends continue.  The Obama Administration thus was able to pump money into the economy to fight the recession without hurting government finances because the money was coming from the fiscally strongest part of the government’s financial structure.

But in the Republican’s alternative world, Social Security is part of the budget and the Social Security taxes part of the revenues that the government collects to pay for its expenditures.  This fiction, supported to a large degree by imprecision in the mainstream media, plays into two basic principles of the current right-wing:

  1. Make the tax system more regressive. Unlike income taxes, everyone pays the same rate for Social Security and there is a cap on the income assessed that rate, so treating it as just another tax makes the overall tax system more regressive.
  2. Destroy Social Security and replace it with a risky private pension system. If Social Security is considered part of the overall budget, then the program is in trouble, since the United States has been spending more than it takes in for years, thanks to Bush II’s decade-old “temporary” cuts for the wealthy and our senseless, costly and bloody wars in Iraq and Afghanistan. 

The House Republicans have now retreated from their intransigent insistence that spending cuts in the budget must make up for the lost revenue to the Social Security Trust Fund from continuation of these temporary cuts through year’s end. They have clearly lost face with the Tea Party element, but to block the continuation of this temporary tax cut for virtually all workers would have lost them the election and taxing the wealthy to “compensate” for the extension would have angered their financial backers.

The Republicans may have lost the battle, but by no means did they lose the war.  The months-long bickering over “funding the temporary Social Security tax cuts” did establish the false idea in the news media that Social Security is part of the overall budget. And while still strong, Social Security is financially weaker than it would be if it had the additional revenues represented by the temporary tax cut. 

Another, more progressive, way to kick-start the stalled economy might have been to pump money into infrastructure improvements, alternative energy development and other job-creating programs and finance it by ending Bush II’s temporary income tax cuts to the wealthy. The Republicans have still prevented this option, despite the fact that surveys keep showing that voters wanted to raise taxes on the wealthy. So the loss of the one battle has enabled the Republicans to keep winning the war.

I want to close this post by recommending a blog called Stochastic Scientist, upon which I stumbled while responding to a tweet from the writer, Kathy Orlinsky. Stochastic Scientist covers scientific developments and offers a very pleasing and well-written mix of science news.

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