by David Welna
National Public Radio, December 7, 2011
President Obama put Congress on noticeÂ Tuesday in a speech in Osawatomie, Kan.
He said that unless a temporary payroll taxÂ cut is extended this month, 160 million Americans would see their taxes go upÂ next year by an average of $1,000. But there’s concern on both sides of theÂ political aisle that the payroll tax holiday might be undermining the solvencyÂ of Social Security.
Fact No. 1: Last year, for the first timeÂ in its 75-year history, Social Security took in less money than it paid out.Â Fact No. 2: This year, the first of the baby boomers reached retirement age andÂ began collecting Social Security benefits. Fact No. 3: The payroll tax holidayÂ that Congress approved a year ago reduced Social Security’s revenues this yearÂ by $145 billion.
Obama showed no sign of being troubled byÂ those facts when he popped into the White House briefing room earlier this weekÂ and called on Congress to extend the payroll tax cut for another year.
“It will help families pay theirÂ bills, it will spur spending, it will spur hiring and it’s the right thing toÂ do,” Obama said.
Republicans on Capitol Hill might disagree.Â Although they do not think other tax cuts should be paid for, they make anÂ exception when it comes to Social Security.
“Getting rid of the way we fund SocialÂ Security through the payroll tax is a dangerous idea,” says LamarÂ Alexander, the Senate’s No. 3 Republican. “Taking money from SocialÂ Security funding is a long-term raid on solvency of Social Security.”
It’s not just Republicans raising red flagsÂ about Social Security, either. Bernie Sanders, the Vermont Independent whoÂ caucuses with Senate Democrats, says he agrees with Obama that middle classÂ families and the working poor need tax relief to weather tough economic times.
“My concern is diverting hundreds ofÂ billions of dollars from the Social Security trust fund into that immediate taxÂ relief,” Sanders says. “So I would love to see tax relief, but done
in a different way.”
Charles Blahous, whom Obama appointed lastÂ year to be one of the six trustees of Social Security and Medicare, thinks it’sÂ a far greater danger than most people anticipate. He too says the payroll taxÂ break might be harming Social Security’s long-term solvency.
“I mean, I’m a Republican and I’m aÂ conservative, and if you were to ask me at a first approximation, do I wantÂ lower taxes or higher taxes, then obviously I want lower taxes,” Blahous
says. “The problem here is that I’m also a public Social Security trusteeÂ and so I’m honor-bound to identify when this causes a change or a difficultyÂ for the Social Security program, which it does.”
That’s because Social Security has longÂ been considered self-financing and thus politically immune from budget cuts.Â But that could change, Blahous says, now that employees are no longer payingÂ their full share into Social Security due to the payroll tax holiday.
“This could be the beginning of theÂ end of the idea that this is an earned benefit [and] where benefits enjoy aÂ certain amount of political protection because of a notion that they have beenÂ paid for in the past by the beneficiaries,” he says.
There’s anxiety among Democrats as wellÂ about the prospect of prolonging the payroll tax cut. Nancy Altman, co-directorÂ of Social Security Works, a Washington-based advocacy group, says she’s beenÂ alarmed to see a Democratic administration dipping into Social Security’sÂ revenue stream to stimulate the economy.
“Democrats were the ones that createdÂ Social Security and the ones that were the strongest champions over its 76Â years,” Altman says. “So to have a Democratic president proposing to
undo the dedicated revenue … it’s a fundamental change that supporters of theÂ program, I think, should oppose.”
Altman worries the payroll tax cut hasÂ become so popular it will be hard to end it, and that’s one reason why sheÂ opposed it in the first place.
“Many of us at the time said that it’sÂ no way this is just going to last one year. And sure enough, we’re back nowÂ talking about expanding it,” she says.
Some lawmakers do say the tax break isÂ worrisome, including Rhode Island Democratic Sen. Sheldon Whitehouse.
“I think one more year should be aboutÂ the limit,” Whitehouse says, “because of the nature of SocialÂ Security.”
A program that, until now, has always paidÂ its way.