Yesterday, Speaker Boehner continued to spin the facts on the payroll tax cut:
Speaker Boehner: “The concern about the payroll tax cut is this: is that we’re taking money out of the Social Security trust fund.” [12/7]
Perhaps the Speaker missed Social Security Actuary Stephen Goss setting the record straight:
Social Security’s chief actuary said a Democratic payroll tax extension bill would have no effect on the program’s finances…
Actuary Stephen Goss sent a Tuesday letter to Treasury Secretary Timothy Geithner and Budget Director Jack Lew giving his thumbs up.
“We estimate that the enactment of this bill would have a negligible effect on the financial status of the Old Age and Survivors Insurance and Disability Insurance (OASDI) program in both the near term and the long term. We estimate that the projected level of the OASI and DI Trust Funds would be unaffected by enactment of this provision,” the letter states.
The letter notes that the 3.1-percent rate reduction in payroll taxes collected from employees is offset by a transfer of funds from the general Treasury.
Or Economist Jared Bernstein:
When the payroll tax holiday was first legislated back in 2010, there was considerable, and understandable, anxiety about the impact of reducing payroll taxes on the Social Security Trust Fund. After all, if 2% of the tax was going to stay in workers’ paychecks, wouldn’t that disrupt the flow to the fund?
Yes, but the legislation was crafted to explicitly protect the trust fund, by transferring resources from the government’s general coffers. Even the Social Security actuary—now that’s gotta be a fun guy at a party—whose job is to protect the fund, publicly recognized the replacement agreement (see box here).
Yet once again, we’re hearing the same arguments from opponents of the extension. These arguments were wrong then and they’re still wrong. In fact, given that the program has been in place for about a year, we can now see the evidence of the payments from the general fund to the trust fund.
The bars in this chart, drawn from the bowels of Treasury documents that account for monthly flows in and out of the Social Security trust funds (there’s one for the retirement program and one for the disability program), show the amount of the transfers through September.
There it is: evidence that the trust fund has been held harmless. This is not complicated stuff. If the tax cut is extended, the new legislation will carry the very same obligation.
The US economy is still fragile in lots of ways, but it’s also shown the slightest bit of momentum in recent weeks. Failing to extend the tax cut right now is thus bad macro and bad micro.
At the macro level, it would be a great way to lose what momentum we’ve got, pulling over $100 billion out of the economy when we should be putting more in. At the micro level, why policy makers would want to reduce workers’ paychecks at a time like this, when so many working families are struggling to make ends meet, is beyond me.
The record shows the trust fund will be replenished. If policy makers still insist on taking away this much needed wage boost right now, they’re going to have to find another reason.
Or Kevin Drum:
Senator Mark Kirk explains his opposition to extending the payroll tax cut that was originally passed last year:
The White House has redefined this as the payroll tax deduction. It’s not the payroll tax deduction — it’s contributions to Social Security. And when the American people hear that we have legislation moving forward to cut contributions to Social Security and drive the trust fund into the red, I think opposition would be fairly overwhelming.
Everybody gets to put their own spin on things, and this has become a common Republican meme over the past week or two. Unfortunately, it’s just factually false. Normally, a reduction in the payroll tax would indeed reduce contributions to the Social Security trust fund, but last year’s bill specifically made up for this loss from the general fund. The trust fund got every penny it normally would have, and all the proposals on the table this year do the same.
What changes here isn’t the solvency of the trust fund. What changes is where the money comes from. Payroll taxes mainly come from the middle and working classes. The general fund is supported by income taxes, which mainly come from the well-off and the rich. So, generally speaking, a payroll tax cut that’s compensated for by transfers from the general fund reduces the taxes of the middle and working classes and raises the taxes of the well-off and the rich.
If Republicans object to this — and they do — they should say so. But it’s long past time to stop pretending that this has anything to do with the trust fund, and long past time for the media to stop passing along this claim unchallenged.