Just imagine this huge debate in two years during an election. No president as unpopular as Obama is going to want to "raise" taxes.
Read Nancy Altman's analysis:
Given that unwillingness to raise taxes by less than a nickel on every dollar earned over $1 million, I find it unfathomable that a more conservative Congress, in two years, in an election year, will increase the payroll tax by 2 percent on the very first dollar, and every other dollar up to the cap, earned by virtually every single worker in the country. Consequently, I think we have to assume that the payroll tax holiday will be extended beyond the two years the president is proposing and quite likely could become permanent.
That means that the federal government will have to continue to transfer $120 billion to the Social Security trust funds each and every year even as it has to transfer more and more interest payments as the trust funds continue to grow and as interest rates return to more normal levels. Unless Congress acts to restore Social Security to solvency, the Treasury bonds held in trust will have to be redeemed, again on top of that new $120 billion transfer from the general fund, starting fifteen years from now, assuming Congress even continues to make the $120 billion every year before that point. These dollars will be competing with dollars for defense, environmental protection, education, school lunches, Food Stamps, Medicare, Medicaid, SSI, Pell grants for low income college students, and every other good and service financed by the federal government.
A permanent two percent cut in Social Security contributions doubles the 75 year projected shortfall. Scrapping the cap (eliminating the $106,800 maximum on earnings), tonally eliminates the shortfall today. If FICA is cut by 2 percent, scrapping the cap gets Social Security only halfway there.
The pressure to cut Social Security in a slow, gradual way for younger workers will be enormous. Progressives will not want to cut benefits for the low-income – and they shouldn’t be cut; they should be increased. Despite the fact that there are few beneficiaries who do not desperately need their Social Security – 2/3rds of the elderly and 70 percent of people receiving disability benefits rely on Social Security for half or more of their income and most people think even more people will be dependent on it in the future – nonetheless, means-testing Social Security will become a viable option. (Eliminating the benefits of those who don’t need them will make no difference to the solvency of Social Security, but will introduce administrative complexity, because it will require everyone claiming benefits to reveal their income and assets, to show they are of insufficient means to get by without it, and will destroy the universal, insurance nature of Social Security.) Changing the benefit formula in the manner proposed by a majority of the Catfood Commission, will appear attractive, even though it would gradually and inexorably eviscerate the benefits of the middle class, and with it, their support for the program.
http://my.firedoglake.com/nancyaltman/2010/12/07/the-end-of-social-security/
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