Concerns Rise On Payroll Tax Cut

When I picked up the Albuquerque Journal yesterday and started reading it, I was pleasantly surprised to find within it a reprinted article written by Jia Lynn Yang of the Washington Post. The article focuses on how cutting the payroll tax may undermine Social Security, a strong concern I have expressed in more than one previous blog.

Yang says that experts, lawmakers and both public trustees of the Social Security trust fund are worried “that Social Security will  lose its status as a protected benefit owed to every working American and instead become politically vulnerable, just like any other government program.”

Yang quotes Charles Blohaus, one of the two public trustees for Social Security, as saying: “It just seems to me the program both financially and politically will be on a lot rockier footing.”

The other public trustee, Robert Reischauer, who is also the president of the Urban Institute, believes extending the payroll tax cut during high unemployment is justified, but if continued for a substantial period of time, could “undermine one of the foundational arguments that makes the Social Security program inviolate.”

Nancy Altman, co-director of Social Security Works, an advocacy group, describes the payroll tax cut as breaking the “fire wall that has always existed between the trust fund and the operating fund.” Altman says that the payroll tax wasn’t supposed to be a stimulus mechanism. “Now the payroll tax is the variable thing that goes up and down according to other economic conditions.”

Nonetheless, despite warnings of longer-term negative consequences, Senate Majority Leader Harry Reid (D-Nev.) has said he will appoint a conference committee to search for ways to extend the two-month cut for all of 2012.

President Barack Obama may have set a precedent whereby future U.S. presidents will reach for a cut in the payroll tax as a way to climb out of a recession.


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