Factcheck - on Tax Cut, Social Security and the General Fund.

[tabatha]

This was a fact check of Bachmann who got most of it wrong. Some here also get it wrong.

Bachmann said she didn’t support the payroll tax cut because “it denied $111 billion to the Social Security trust fund”and “put senior citizens at risk.” That’s false. The shortfall will be covered by the government’s general fund.

=> Reducing the Social Security payroll taxes paid by employees by 2 percentage points (to 4.2 percent) obviously brings in less money for Social Security. But the trust fund isn’t suffering as a result. The government must cover the shortfall with general fund money.

The Social Security and Medicare Boards of Trustees said in its 2011 report: “The loss of payroll tax revenue due to this one-year reduction will be made up by transfers from the General Fund of the Treasury to the OASI and DI Trust Funds and will thus have no financial impact on either program.”


http://www.factcheck.org/2011/12/bachmann-wrong-on-social-security-jobs-debt/

[RC]

1. The Payroll Tax Cut opens a door between the General Fund and the totally separately taxed fund for

for Social Security.

A door that was not even there before. That is the real reason this particular tax cut was set up as it was in the first place, to establish that connecting door.

Secondary to that is the propaganda of giving people a little extra money. That was to sell the tax cut and to make it harder to rescind. Those that need the money the most, get the least and vice versa. And down the road that is just that much less money to pay out to retirees. The replacement funds from the general fund is a smoke screen, a Trojan Horse, if you will. The small amount each tax payer gets is too small to do much for any recovery. All it will do is make Christmas revenues look a little better, so they can say "Hey look we are still on the road to recovery". The reality will be 'not so much'.

People should be concerned about taking money from a broken general fund to pay for Social Security paychecks. How long should we expect that to continue? And speaking of the General Fund, they are taking money from the General fund to replace money taken from the Social Security fund. Why not take it from the General fund in the first place? Why the money shuffle?

Most people will not connect the dots, let alone look far enough down the road to if/when the Republicans have full control of Congress again and they will try to balance the budget with their treasonous Grover Norquist's "No new taxes" mime of "if it gets spent here, we have to cut there" mentality.

The cuts will come from Social Security because it is now "funded" from the General Fund. Never mind most of it is still not, but the perception put out by our greedy overlords, will be Social Security is killing any attempt to balance the budget and therefore will have to be cut or eliminated.

And that is why the Payroll Tax Cut is wrong from the get-go. We are being had again people.

[tabatha]

3. That is the real reason this particular tax cut was set up as it was in the first place,

Proof ?

[grantcart]

9. Why the money shuffle?

Simple

by opening the door between the two funds then it creates the option, which is currently being used, that some of the money will come from the general fund revenues rather than payroll tax revenues.

SS payroll taxes are both regressive and have a very low ceiling.

General fund taxes are progressive and have no cap.

I have had many years where I paid the same SS contribution as Bill Gates but never got close to his income tax payments.

Usually when Democrats are for it and Tea Party folks are against it there is a pretty basic reason it is good.

[phleshdef]

18. How is "no cap" more progressive in this economy?

Actually, the best argument for using the payroll tax as a vehicle for short term stimulus is the fact that it DOES naturally have a cap, the 106,000 cap that is placed on the taxes that fund social security benefits. That way it ensures that top 1% type incomes don't get an enormous tax cut, while everyone else basically qualifies.

I don't buy this superstitious bullshit about opening imaginary doors and unleashing evil spirits of libertarian destruction. Its a bunch of nonsense. Aside from that, the government opened that door ages ago. Didn't they move money from social security into the general fund? At least this time, its going the other direction.

[phleshdef]

16. Thats an empty "slippery slope" argument. The "open door" is a product of ideological imagination.

Forgive me if I don't buy into symbolic political superstitions.

Either you are for stimulative spending, even without being able to increase taxes elsewhere, or you aren't. So which is it? Forget about the payroll tax cut for a minute and pretend its some other kind of attempt at stimulus that ultimately costs the general fund the same amount of money, are you still against it in that scenario? You should be, if you have consistent beliefs.

If the government takes any measures to pump money into the economy at all, its going to cost the general fund. House Republicans aren't going to raise taxes right now, thats obvious. Are we to not spend anything on near term stimulus at all then? Is that what you are saying?

[MilesColtrane]

19. Just to be clear, you're siding with Michelle Bachmann on this?

wow

[RC]

21. You are seeing what you want to see.

I don't know and don't care what Michelle sees.
Why not just take the money from the General fund in the first place and cap the income level of who gets the money? That would be simpler than the slight of hand pocket shuffle going on now.

[eridani]

24. There is already a maximum yearly payout for SocSec

Raising the cap need not change that.

[creeksneakers2]

29. Which is funny because

The same people who think decoupling SS contributions from benefits will destroy the program love the idea of raising the cap on tax liability without increasing the benefits for the rich. That would decouple too, and the AARP pointed this out. Why won't raising the cap ruin SS?

[eridani]

32. No, it wouldn't. The rich would still get benefits

Initial benefits formula is already progressive. Nothing wrong with making it moreso, only with telling the rich they don't get anything.

[creeksneakers2]

28. That's not possible

The GOP refuses to go along with anything else that would deliver money to the lower part of the income ladder.

[creeksneakers2]

27. Who exactly is behind this conspiracy?

Because I think the idea of this tax cut originally came from Obama and Democrats.

[joshcryer]

37. The Neocons are. They want to make the general fund a sacred cow that cannot do social spending.

So they made up this idea that SS is separate (it hasn't been since 1969) so that they can spread the false meme that any money coming out of the unified budget is being spent "unwisely." It's an intrinsically right wing position to take.

[sabrina 1]

31. Thank you. They want to be able to say that the Government has to fund SS turning it into a

welfare program. Up to now, when they tried that, they couldn't get away with it. I bet rightwingers will jump on this, and now how do we argue against them?

It is wrong, and I cannot believe that Democrats for the first time have caved to turning SS into a program not supported by the people. I hope this ends in two months.

This will benefit those earning the most. Minimum wage workers will hardly notice the difference, but their employers will. And Corporations love it as that Tax has to be matched by employers.

Think how much big Corps will save as a result.

If they want to put money in the pockets of those who need it most, raise SS benefits, they earned it, it is their money. And lower the Income Tax.

I wonder whose idea this was? The Heritage Foundation's maybe?

[joshcryer]

38. So the "general fund" should be untouchable?

[shraby]

43. The general fund has been giving iou's to the social security fund for years.

As social security needs it, it gets paid back. That "door" you allude to has always been open and the social security fund has been borrowed from for a long time.

Why do you think Al Gore spoke about a lock box for soc. sec.?

[PETRUS]

2. Why cut payroll taxes, then?

Why not just give everyone a tax cut equal to 2 percent of their wages up to $110,000? Cutting payroll taxes and making up the shortfall from the general fund will tie Social Security to the deficit. This further arms the right wing in their efforts to "reform" or privatize or do away with Social Security altogether.

[tabatha]

4. I think it is because it helps businesses.

Giving everyone a tax cut is not the same.

[PETRUS]

6. That's a reasonable supposition.

If employers' contributions are reduced as well. But it puts the nation on a dangerous path, and there are much better options for stimulus.

[tabatha]

8. Yes, there are better options. But they would not be passed by the House.

[ThomWV]

5. Tabatha, what you seem to fail to realize is that the coupling of GF and SS is the real problem

The problem is not so much that there is a temporary shortfall in the income the Social Security system is receiving, its got enough fat (surplus) in the system that it could easily absorb it. The problem is that by following our current practice of using Social Security System income (payroll taxes) as the first dollar spent in funding Government, which is where the entire "trust fund" has gone, and then using General Revenue to pay out the monthly checks what you have done is turn the entire system from a self-sustaining one to just another "entitlement program" in the General Fund. And that means that it is then subject to the whims of Congress, it could be cut as easily as food-stamps or used as a political weapon just like unemployment benefits are. That's the real problem with doing anything other than re-establish the independence of the so called "trust fund".

In short Social Security must be allowed to be self sustaining and utterly divorced from the General Fund. You can no do that by reducing its income.

[tabatha]

7. "The problem is that by following our current practice of using Social Security System income"

Letter-writer Roy M. Cantrell apparently holds the common, but mistaken, belief that “the federal government has stolen from the Social Security Trust Fund, leaving behind worthless IOU’s.”

The Social Security Trust Fund is held in treasury securities, always considered to be the safest possible investment. To quote from the original 1935 Social Security Act, “It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgement, required to meet current withdrawals. Such investment may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States.”

This requirement has never changed. All companies and governments that hold U.S. Treasury securities list them as assets, not worthless IOUs, in their accounting.
----

ThomWV, what you fail to realize is that you are spouting BS again.

"By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash."

http://www.ssa.gov/oact/ProgData/fundFAQ.html

[Romulox]

10. The trust fund represents *future obligations* ("DEBT") to US taxpayers--there is no

third party these funds can be collected from.

[tabatha]

11. Social Security Trust Fund - the facts

The trust funds run surpluses in that the amount paid in by current workers is more than the amount paid out to current beneficiaries. These surpluses are given to the U.S. Treasury (and thus become part of the general federal budget) in exchange for special U.S. government securities, which are deposited into the trust funds. If the trust funds begin running deficits, meaning more in benefits are paid out than contributions paid in, the Social Security Administration is empowered to redeem the securities and use those funds to cover the deficit.

...

As of the end of calendar year 2010, the accumulated surplus stood at just over $2.6 trillion.[8] Projections are that current receipts will continue to exceed expenditures until 2017. Thereafter, there will be a shortfall that will be made up by withdrawals from the Trust Fund, although the Trust Fund will continue to show net growth until 2025 because of the interest generated by its bonds.[9]

http://en.wikipedia.org/wiki/Social_Security_Trust_Fund

[Romulox]

12. None of that contradicts anything I posted. The "Trust Fund Surplus" must be collected in NEW TAXES

from US taxpayers before it can be distributed to beneficiaries. That's because 100% of the "Trust Fund" is spent in the day to day operation of the US government. Your links say exactly the same thing.

[tabatha]

14. The Trust Fund Surplus has been accumulating since the days of Reagan.

Future taxes will pay future benefits and add to the surplus.

SS will only rely on "future debt" in 2025.

[Romulox]

15. Nope. Every penny has been spent. SS is 100% Pay-As-You-Go. nt

[eridani]

25. Wrong. The trust fund was built up starting in the 80s to PREPAY boomer retirement

It is supposed to be spent down, and then the system will go back to pay as you go.

[Romulox]

26. Every red cent has been "lent" to the US government, and spent. It's sad, but true. nt

[eridani]

33. In the form of T-bills. If those are imaginary, then so are the ones that China--

--and other investors bought.

[Romulox]

39. No. They aren't "T-Bills" (they're "special issues".) But that's not the point.

The debt owed by the US government to the SS "trust fund" is just that--DEBT. It must be paid back by US taxpayers, not by the Chinese. In any event, there is no hidden stash of money--it's been spent!

[creeksneakers2]

30. Future taxpayers are the third party

[Romulox]

40. Nonsense. SS is supposed to be INTERGENERATIONALLY SUSTAINABLE. Future taxpayers

require their own stream of payments. The CBO says that the current scheme simply is insufficient.

[creeksneakers2]

42. I don't get what you mean

The tax payers who will be the third party paying off the bonds will in turn get the money from their kids when they grow old. The current course is insufficient in the long run but can be made sufficient with minor adjustments.

[lumberjack_jeff]

17. Social Security is an entitlement program by virtue of the fact that participants are entitled to it

Commingling GF and SS turns it into welfare, which is NOT an entitlement.

In general, I agree with you. SS should stand on its own, and the GF should be forced to honor it's debts to SS.

[Romulox]

41. You don't have a right to receive any specific amount of SS. So that logic is off. nt

[phleshdef]

20. I'm sorry but that argument doesn't really add up at all.

You are treating this arrangement as if its some kind of precedent setting court decision or something of the like, and its not.

I'll say it a thousand times today. This "opening the door to social security" argument is superstitious nonsense.

There is nothing in this arrangement that say Social Security is getting reimbursed based on the proportional size of the general fund. Nothing. The arrangement is that Social Security is getting reimbursed dollar for dollar what it would have received if the 2% payroll tax cut never existed. They can shrink the general fund in half but the law still states that Social Security has to get a full reimbursement. There is no proportional adjustment as your argument alludes to.

As I said to another poster, this imaginary door was already opened a long time ago when they moved money out of Social Security into the general fund, at least this time, its going the other way.

There are good, progressive reasons to use the payroll tax as a vehicle for stimulus during a time like this. The cap on social security payments naturally keeps the benefit of the tax cut in the realm of the middle class. And the nature of the payroll tax system thats already in place makes it an efficient way to distribute this benefit. Its definately not something that should last forever. But while unemployment is over 8% and the Republicans own the house, I think its perfectly acceptable. Its bottom up, demand side stimulus and I'll take all of that I can get until the economy recovers.

[kentuck]

22. ..and after the economy recovers...

..what then??

[phleshdef]

23. Let everything revert, including all the Bush tax cuts. Or completely redo the entire code.

The primary tasks should be to get unemployment down to normal levels, get the housing crisis under control and experience some geniunely good GDP reports. After that, then I think there will be a lot more breathing room for making serious tax changes in general and truly getting the deficit under control.

[joshcryer]

35. Indeed, and that will happen, people don't get this.

It happened under Regan, it happened under G. H. Bush.

[joshcryer]

34. SS has been part of the unified budget since 1969.

It's been in and out of budget through quite a few recessions and that hasn't destroyed it.

Why is the general fund untouchable?

Should the SS fund be allowed to cut payments to people during a deep recession? No, it should be paid for out of the unified budget.

[freshwest]

13. I understand the fear of changing the assets from 'SS' to the General Fund.

We've seen the way corporates have fiddled with their input to the tax base, and stolen from the taxpayers with their own form of welfare. At the same time, human needs, under GOP rule, offer 'grants' that are temporary, one-time solutions to long-term issues.

I think this is the main fear of trusting the General Fund, and the other part, sadly enough, is economic class. Some people get a lot more out of SS programs which are not means tested, and don't want to be lumped in with the ones they consider lower or less hard working.

The GOP take everyone's tax funds out of the General Fund while they dismantle the safety net and entire systems state by state. And they've made no bones about getting rid of all things they term socialist, such as *ding ding* Social Security. Hey, the private sector has done such a great job on private pensioning, huh?

The media is the GOP's tool, generating support or opposition to government programs that were the mainstay of many people's survival when the private sector finds no profit there. Once the people are out of the public eye and into private schemes, they are dismissed, and many do not survive when the profits are taken out.

What we need to do is to reframe the argument about what the General Fund and General Welfare means in this country. I know Europeans who tell me, yes, they pay higher taxes into their General Fund. But they consider themselves to all be citizens, have made the commitments required to be citizens, and don't worry about getting their fair share in return. At least, in those countries who haven't surrendered to the GOP, 'everything must be private' meme.

People holding on the Social Security 'lockbox' theory have reasons to fear the lessening of payroll taxes within the compartments of the system as it was set up. I support that system, and all the New Deal programs. But, things are being re-defined now. After decades of wingnut propaganda, they are struggling to make the arguments for progressive government.

During this same period of time, the GOP has been pillaging of the US Treasury and 'starving the beast.' What a laugh, they are the BEAST.

We've got to get to the basics, like OWS says.

Time to end the construct of 'I paid in this much, thus I should get this much' while the next door neighbor lives in terror from month to month because their SS payment is so much lower. Time to end the arguments of 'welfare queens, maybe they're not really disabled and immigrants and minorities are stealing my SS.'

Time to go back to the General Welfare clause and realize why Thomas Paine wrote Agrarian Justice. The same thing he wrote, enshrined in the SS website, remains true today. And it's way past time to recognize that if you are alive, you deserve the means to LIVE and a place to EXIST.

Interesting times we live in, much wailing and gnashing of teeth now, and even more to come.

[joshcryer]

36. I don't understand it unless we're to believe the "general fund" is untouchable.

SS is mandated by law. Cuts to SS would be illegal unless those cuts were codified into law. Since the unified budget SS has been calculated along with the general fund. It's an accounting trick to make the government look better than it does, because it has that big revenue stream that isn't allowed to be touched by law.