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Liberal nightmare, Obama social security “tax cut” dream

Liberal nightmare, Obama social security “tax cut” dream

All the news is focused on whether the House Republicans will cave and go along with the unworkable and illogical Senate two-month extension of the social security “tax holiday.”

That is how stupid politics has become, both Democrats and Senate Republicans are lashing out at House Republicans for refusing to go along with an unworkable plan.  House Republicans probably will, and maybe at this point should, pass the damn thing not on the merits but because Senate Republicans threw them under the bus.

House Republicans should not be the only ones outraged.

I’ve been beating the drums since before the 2008 election that Obama’s plans for revamping how FICA money is paid and used — the most recent being the “payroll tax holiday — should have liberals screaming.

Obama almost singlehandedly is taking a sacrosanct flow of FICA money and turning it into just another “tax” to be played with a political circumstances dictate.  In this case, the political circumstance is a second year of diminished FICA payments as part of a class warfare strategy to get Obama reelected.

FICA, however, is not an ordinary tax, it is the funding mechanism for Democrat’s most cherished program.  Politicizing the flow of FICA contributions moving into the pipeline makes it that much easier to politicize the flow of benefits exiting the pipeline.

Liberals have sold their social security soul for Obama’s reelection, and they will never get it back.

My prior posts on the subject:

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Comments

I figure this is part of Obama’s plan to get the bottom 50% to pay no federal taxes at all, not even the dreaded payroll tax.

    Doug Wright in reply to Neo. | December 22, 2011 at 10:16 am

    @Neo: You’re right on target. Obama’s 3rd step then is to declare that taxpayers can’t vote, only welfare recipients can vote; a Socialist’s dream!!!!!!

    And the dirty little secret is that, in a sense, a very large majority of folks who fit in the “no fed taxes paid” category really don’t pay any payroll taxes either. And it’s not really a secret at all. In fact, the IRS budgets big bucks to advertise the method. A little thing called the Earned Income Tax Credit (EIC or EITC). If you have earned income from a job and make under a certain amount of money (and the cap amounts will quite often put you in the no fed taxes owed category depending on the number of dependents you have) you are eligible for up to just shy of $6,000.00 in EITC each year. This more than reimburses any payroll taxes withheld throughout the year. And the double whammy is that because payroll taxes were withheld during the year, even though they were more than reimbursed at tax time, the person still gets credit for the contributions when it comes time to collect SS and Medicare.

Cuts in payroll taxes mean cuts to SS and Medicare. How in the world obama can support this, I have no idea.

    McCoy2k in reply to imfine. | December 22, 2011 at 12:43 pm

    Exactly! Republicans that used to propose reductions in payroll taxes in the past routinely were attacked for cutting social security and medicare. It’s basically exactly what Bill Clinton did to Bob Dole and the Republicans in Congress during the ’96 election cycle.

    janitor in reply to imfine. | December 22, 2011 at 2:13 pm

    Cuts in payroll taxes mean cuts to SS and Medicare. How in the world obama can support this…

    Not necessarily so in Obamaland. There’s always taking the money from another revenue source — or taking on more debt.

The entire scenario baffles me; Obama is going to start trotting out stories of families who will be severely impacted if they don’t receive $160 FICA cut…though the suggested alternative is for them to receive a $1000 FICA cut? This FICA holiday does nothing to actually stimulate the economy.

For the Dems, defunding Social Security this way will help them create a blueprint for a revised system that sees the wealthy pay more, the middle class pay nothing, and the program will likely become need-based.

For the Republicans, I see no benefit other than hastening the demise of Social Security, which should help in separating SSI and Medicaid from the Sacred Fund.

Thank you!! I know it’s old news to complain about liberal media bias, but the fact that Obama can advocate to cut revenue to Social Security and Medicare and get away with calling it a Payroll Tax Holiday without a peep about what he’s really cutting is beyond me. It’s even more disturbing that so few conservative players are prepared and equipped to argue the point.

[…] William Jacobsen at Legal Insurrection, has penned a scathing take on this ‘dog & pony show’: All the news is focused on whether the House Republicans […]

The complications of designing a 941 form to account for tax rates at one level for 2 of the 3 months on the form, not to mention the complications of programming the many payroll accounting programs in use on such a short time frame should make the 60 day option a non-starter. At a minimum, the different rate should be for at least a full quarter.

This says nothing about whether it is good policy.

Thank you for this post Prof J.

I have been arguing this point with friends and family for weeks now. If you are a Democratic Senator/Congressman (especially one who supported Hillary), then I think it is absolutely unconscionable they are staying silent on this. Obama is virtually making it impossible for this tax holiday to ever end. Ever. Espcially with his antics today by bringing up ordinary people to stand with him as he beats the Reps over the head with thier failure to pass the Senate bill.

With an election every two years, this “Holiday” will forever going forward be an election issue.

I think Obama has no long-term plan here. Cutting FICA is the easiest way to give every worker an effective wage increase and in the Keynesian view boost aggregate demand. Some sociologists did a study in 2008 that purportedly showed a windfall doled out in small increments would be spent at a higher rate than a lump-sum payment like the Bush stimulus checks. But IRS stats showed both were largely saved, and the incremental payments were actually saved at a slightly higher rate. But Obama must’ve missed that memo.

Obama would of course prefer a 1-year extension for its perceived economic benefit, but he seized on the political opportunity to beat Republicans over the head with a 2-month extension that, as Loren pointed out above, is technically unworkable according to payroll experts. The optics were all aligned for Obama on this fight even though the policy was completely wrong-headed. From his point of view he had two lousy bills and chose to promote the one from the Democratic Senate so he could bash the Republican House. Personally I think he got lucky that McConnell agreed to kick the can and leave town. Probably had a lot to do with Senator Brown and a handful of nervous Nancys who threatened to vote with Reid if McConnell didn’t cut a quick deal before Christmas.

Still, Republicans won a lot here: they get to keep the XL pipeline issue alive for a few months and drive down Obama’s ratings among Ohio, Michigan, and Pennsylvania union members, they got Obama to drop talk of a millionaire’s tax, and they dispensed with the last of Obama’s “jobs bill”. Now Obama has gotten the two biggest items in his laundry list of warmed over stimulus (FICA and unemployment) and will have a harder time claiming that Republicans blocked him from helping the economy. And there was little doubt Republicans were going to extend both of them in some form anyway.

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