Alan Greenspan has chutzpah

[Frank Newgent]

http://www.nytimes.com/2004/03/02/opinion/02KRUG.html

The payroll tax is regressive: it falls much more heavily on middle- and lower-income families than it does on the rich. In fact, according to Congressional Budget Office estimates, families near the middle of the income distribution pay almost twice as much in payroll taxes as in income taxes. Yet people were willing to accept a regressive tax increase to sustain Social Security.

Now the joke's on them. Mr. Greenspan pushed through an increase in taxes on working Americans, generating a Social Security surplus. Then he used that surplus to argue for tax cuts that deliver very little relief to most people, but are worth a lot to those making more than $300,000 a year. And now that those tax cuts have contributed to a soaring deficit, he wants to cut Social Security benefits.

The point, of course, is that if anyone had tried to sell this package honestly — "Let's raise taxes and cut benefits for working families so we can give big tax cuts to the rich!" — voters would have been outraged. So the class warriors of the right engaged in bait-and-switch.

There are three lessons in this tale.

First, "starving the beast" is no longer a hypothetical scenario — it's happening as we speak. For decades, conservatives have sought tax cuts, not because they're affordable, but because they aren't. Tax cuts lead to budget deficits, and deficits offer an excuse to squeeze government spending.

Second, squeezing spending doesn't mean cutting back on wasteful programs nobody wants. Social Security and Medicare are the targets because that's where the money is. We might add that ideologues on the right have never given up on their hope of doing away with Social Security altogether. If Mr. Bush wins in November, we can be sure that they will move forward on privatization — the creation of personal retirement accounts. These will be sold as a way to "save" Social Security (from a nonexistent crisis), but will, in fact, undermine its finances. And that, of course, is the point.

Finally, the right-wing corruption of our government system — the partisan takeover of institutions that are supposed to be nonpolitical — continues, and even extends to the Federal Reserve.

Being self-employed, I pay about 15% to to Social Security and Medicare. Up to $87,000, that is, for last year.

Nobody pays anything into Social Security above this ceiling.

Somewhere between $1,000,000,000,000 and $2,500,000,000,000 in surpluses (depending how one interprets the figures) will result from Social Security taxes exceeding Social Security spending from 2003 through 2012. The Congressional Budget Office predicts a $1,500,000,000,000 to $1,800,000,000,000 deficit (not including raided Social Security funds) for the same period.


Tax cuts? I thought neo-conservatives liked to argue against income redistribution.

 

[a_unique_person]

Are you saying that in the US social security is taxed as a separate tax, and that the take of this tax is more than is spent on social security.

I know we have a 2 percent 'health' tax. It all goes into consolidated revenue. The nominal splitting up by name is a total sham.

 

[Frank Newgent]

Are you saying that in the US social security is taxed as a separate tax, and that the take of this tax is more than is spent on social security.

Yes and yes. In theory.

But, again, no one pays a nickel on income over $87,000.

The surplus is being used to help offset the deficit in the rest of the budget.

 

[a_unique_person]

Myabe he should have said in his election campaign,

I'll cut taxes for the rich, and for the rest of you, I'll increase taxes.

 

[specious_reasons]

Are you saying that in the US social security is taxed as a separate tax, and that the take of this tax is more than is spent on social security.

I know we have a 2 percent 'health' tax. It all goes into consolidated revenue. The nominal splitting up by name is a total sham.

In the US, all workers pay Social Security taxes, like Frank says. Some of the money is used to pay the current beneficiaries. The remaining money is then "borrowed" by the Federal Government. I'm too lazy to look it up, but approximately 20% of all interest-bearing debt the US Government owes is the Social Security Trust Fund.

So SS taxes make the budget deficit look smaller, but increases the US debt. A different kind of total sham.