Payroll tax holiday — another idea that could come from the Grinch

During the Reagan era, an administration staffer came up with the term “starve the beast” when discussing his perceived solution of cutting taxes to force a reduction in government spending.

Today, opponents of Social Security, who evidently consider the program a “beast,” are working overtime to cut its funding and thus force the pay-as-you-go program to reduce benefits — perhaps eventually leading to a far different program.

These opponents lost out on the Deficit Commission; they needed 14 commissioners to vote for the plan, which created huge cuts to Social Security benefits, in order to force a vote on the plan in Congress. They only got 11 votes.

So, their new tactic is to force Congress to pass a “payroll tax holiday,” cutting everyone’s Social Security tax payments by two percent.

It sounds so nice — a holiday! — yet the end result would be disastrous for the program.

Recent polls show that people are willing to pay more in taxes to maintain Social Security as it is (or even improve it — imagine that!). But once a two-year cut of two percent of payroll taxes is in place, it seems unlikely that the two percent will be reinstated. That would be a “tax increase,” just as getting rid of the “temporary” Bush tax cuts for the wealthy is a “tax increase.”

They know that no politician likes raising taxes and few have the guts to stand up to the demagoguery around that label.

So these Grinches may have their fondest “holiday” wishes come true: Social Security is starved for income as the baby-boomers retire; the program resorts to means testing, turning it into a welfare program instead of the social insurance program envisioned by Frances Perkins and FDR; benefits, now insufficient, become more and more meager; and some sort of privatization is put into place.

There’s no happy ending to that Grinch’s story.

Link to our statement on the Deficit Commission Report

FPC on DeficitCommissionReport