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Agreed, those are the main pools of money at this time. But, the lack of a comprehensive public debate about future program direction disturbs me.
Are both parties just planning on demagoguing this the next election cycle, and make it a political football?
I hope not, this is too important a program to "toss up for grabs".
I am less worried about the centrist within each party and more about their left and right wings. I suspect this sounds familiar to you coming from me. The left wants our money to fund social programs and the right has an ideology difference with. Your worries about the next election cycle are well placed as the priority of many elected leaders is to be reelected.
I would see a couple of downsides to this, the larger being that it downgrades the "third-rail", untouchable nature of SS, turning it to some degree into just another day-to-day fiscal policy tool instead of a long-term system that we maintain before we start bickering over the actual day-to-day stuff. A second negative is that it's actually a worse deal for very low-income workers (<$20K) than extending the Make Work Pay credits that the payroll cut replaces would have been, while increasing the benefits of those who don't need them nearly as much (income = $75K to $105K). That's going to lower the multiplier some, but the overall volume from the payroll cut will be higher than with extending MWP, so it's very likely a slight step up in stimulus terms.
In long-term policy terms, it's a double-edged sword. It's tough to predict what payrolls will look like in 2011, but the projected tax cut of $110 to $120 billion would be at least in the same ballpark as what the 2011 SS surplus would have been. Thus, what it would be costing the system would be that much plus interest off the peak trust fund balance in the late 2020's or so. That's a significant but not crippling loss, and if the replacement promise is kept whereby SS is made whole through the assignment of offsetting special-issue securities to the trust fund, then there is no long-term effect on the financial status of the system at all, and the payroll cut is actually being paid for out of future borrowing along with much of the ret of the stimulus program.
That leaves the question of what happens a year from now, and it's probably anybody's guess at this point. A lot may depend on how perceptions of political momentum are running then. Obama may be able to use the moment as a lever to introduce a comprehensive upgrade to SS, putting it on a 75-year basis that even the very pessimistic SS Trustees couldn't doubt. Or the faux-populist Republicans may be able to use it as a lever to again try to gut and/or privatize the system, making it work for Wall Street, but not for retirees and other beneficiaries. I don't have a bells-and-whistles crystal ball to be able to see how that will work out, but I suspect that much may hinge on public tolerance for GOP antics. They were given a lot of license over the past two years for having been poor little orphans left on the outisde looking in. They could get away with a lot of garbage just on the basis of a free pass for that. Now they are on the inside again, and the thinking at least is that public tolerance for tantrums has about run out, with the tenor of the lame-duck session being a fairly strong indicator that Republicans realize that, even if they don't quite know what to do about it yet. Playing against them also will be the still very considerable stock of distrust of Republicans when it comes to SS and the still very staunch defense of SS that seniors may be expected to put up over it.
So we'll see. In stimulus terms, the deal is a small net step up. If followed through on, it doesn't do any long-term damage to SS in the financial sense, but in the political sense, it is still at least some form of risk. The agenda item it creates for next Fall could go either way, so it will pay to be prepared. If forced to throw a blind-folded dart of speculation at it, I would guess that it will go down to the very last minute, and that Obama will trade some sort of short-term Republican-looking resolution for his shot at introducing a signficant long-term overhaul of the system that he can then run on into the 2012 campaign.
That's my main concern, that this is setting up a series of discussions and decisions that are going to have substantial negative consequences for future (and perhaps even current) Social Security recipients.
I'm just really surprised this hasn't been a big focus in our national dialog.
This is a nation of sheeple. Most probably do not understand the importance of this.
Thanks for the comprehensive perspective Sag, I know you are "in the business" so I appreciate the insights.
After this year's cuts expire, I'm concerned political pressure will result in significant difficulty in reestablishing the current contribution rates. As part of the dialog, I'm hopeful we'd take the measures necessary to sustain the current program over the remainder of the century. However, I'm aware of the proposals, some from Representative Paul Ryan, to modify (lessen) the current program and instead establish saving accounts. Though in and of itself I don't mind evaluating alternatives such as supplementing Social Security with private accounts, I think these discussions may be as a tradeoff with the current level of benefits. However, the Republicans will have to be proposing programs and policies instead of throwing stones, so perhaps a negative public reaction may mute some of the potential program benefit reductions.
Though many of Obama's supporters are listing this payroll tax reduction as another plus in his column of helping the lower or moderate income folks, I'm not sure he won't have ultimately done it to their detriment.
I am less worried about the centrist within each party and more about their left and right wings. I suspect this sounds familiar to you coming from me. The left wants our money to fund social programs and the right has an ideology difference with. Your worries about the next election cycle are well placed as the priority of many elected leaders is to be reelected.
One of my concerns though is the centrists are increasingly being marginalized in the current election processes. If fewer are steering the discussions, I'm concerned that an ultimate compromise may end up hurting what has been one of our most successful programs.
Maybe I'm worried about nothing, but I don't want to see my kids damaged by these agreements.
One of my concerns though is the centrists are increasingly being marginalized in the current election processes. If fewer are steering the discussions, I'm concerned that an ultimate compromise may end up hurting what has been one of our most successful programs.
Maybe I'm worried about nothing, but I don't want to see my kids damaged by these agreements.
We are both in full agreement. Each end of the wing nuts have self serving agendas.
"House Republicans have no plans to extend a payroll tax holiday scheduled to expire in 2012, according to several leading GOP members. House liberals have warned that conservatives next year might push to extend the one-year payroll tax cut that was included in the White House-GOP tax package, leaving Social Security to compete with other programs for funding — and threatening seniors' benefits over time. Rep. Jeb Hensarling (R-Texas), who will head the House Republican Conference in the next Congress, said he didn't support the payroll tax holiday to begin with and won't support an extension."
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