Reply #3: Let's Just Raid Social Security [View All]

http://www.testosteronepit.com/home/2011/9/7/lets-just-raid-social-security.html

Out of one side of its mouth, our political system talks about reforming Social Security to preserve it for a few more years, and out of the other side of its mouth, it proposes to expedite its demise. As rational observer, you'd just like to get a big roll of duct tape and close off all these orifices for a while.

There are rumblings everywhere about a one-year extension of the "temporary" payroll-tax cut. Effective for all of 2011, it reduces the employee portion of the Social Security tax from 6.2% to 4.2%, thus giving us a little extra spending money. And collectively, it's more than a little: $100 billion for the year. The idea is that we'd spend this extra money, which would nudge up GDP and create jobs somehow somewhere. Yep, GDP and consumer spending are up a bit, despite dropping real wages and sagging consumer confidence. Yes, the inexplicable American consumer...However, the mind-boggling U.S. trade deficit, particularly in consumer goods, sees to it that much of this extra money is going overseas. And it certainly hasn't created many jobs in the U.S., as we know from our dismal jobs reports.

But here is one thing the payroll-tax cut did do very effectively: It raided Social Security by $100 billion. And now, they're proposing to raid it again. But to be fair, let's include an employer portion. Combined, it would amount to $200 billion for next year. And why not make it permanent? Because letting it expire would be decried, much like today, as a huge jobs-destroying "tax hike," while the $2.6 trillion Social Security Trust Fund just sits there, fat and plump with all this "money." So, if we wanted to phase out our Social Security Trust Fund, that would be one way of doing it. After a decade or so, it would be gone. China would have a quarter or more of it, and the rest would be spread around. End of story. We'd finally be rid of it...It's like raiding your 401k. Just clean it out, buy some stuff, and go on. Don't worry about later. To heck with retirement. Sure, that's one way to proceed. And if that's what we want, let's say it outright. Let's state clearly that we want to phase out our Social Security Trust Fund, that we want to bankrupt the Social Security system on an expedited time line, and that this payroll-tax cut is a way to accomplish that in an efficient manner.

But if we want to preserve our Social Security system, we need to keep inflows and outflows in balance over time. When inflation, job losses, and demographics throw the system out of whack, we need to adjust it. Alas, that adjusting is called the "third rail" of politics. How much easier and how much politically more expedient it is to raid it! So, let's just go do that instead.