Republican Senators Push False Argument That Payroll Tax Cut Will Undermine Social Security

Republican Senators Push False Argument That Payroll Tax Cut Will Undermine Social Security

By Travis Waldron

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The latest argument to emerge from the GOP has been that extending the payroll tax cut would undermine Social Security, since payroll tax revenue goes directly into the Social Security Trust Fund. Multiple Congressional Republicans have adopted that theory of late, including South Carolina Sen. Jim DeMint (R), who put it to use on CNBC last night:


Kentucky Sen. Rand Paul (R) made the same argument on Fox News earlier in the day:


Watch a compilation:

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That argument, which has been adopted by members of both parties and perpetuated by news outlets like NPR, has one problem: it’s not true. Each of the plans under consideration is fully paid for, replacing revenue the Social Security Trust Fund would have lost from lower payroll tax receipts with money made up from either alternative revenue sources or spending cuts. The earlier payroll tax holiday, set to expire this month, was also fully-funded, and the program has thus far “been held harmless” from the holiday, as Reuters noted today....Social Security actually has a $2.6 trillion surplus and is solvent through at least 2037.

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UPDATE Stephen C. Goss, the Chief Actuary of Social Security, said today that the Social Security Trust Fund “would be unaffected by enactment” of a payroll tax cut extension, according to a statement circulated by Sen. Bob Casey (D-PA). The Congressional Budget Office agreed, saying all lost revenue would be offset.

UPDATE Joe Sonka, a reporter for LEO Weekly in Louisville, Kentucky points out that in addition to means testing, Paul has also supported privatizating Social Security and called it a Ponzi scheme, making his strident defense of the program now seem even more insincere.

The point is completely accurate The nature of Social Security funding is fundamentally changed.
It will be tied to the congressional budget, subject to the whims of whoever is in control.
Between the Republicans and the DINO's, you could end up paying for a dead horse because S/S could possibly not exist because of lack of funds when you retire. Is that what you want?

The NYT wrongly told readers that the payroll tax cut cost Social Security, "resulted in $67.2 billion of lost revenue for Social Security in 2011." This is not true. The tax cut was fully offset by money from general revenue so that the trust fund was unaffected by the tax cut.

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That aside, Sargent has another point, that this is another set up from Republicans to argue that it's the Democrats who are trying to undermine Social Security, and that they, the Republicans, who are the true defenders of the program.

Well, here's a suggestion to combat that, and to actually strengthen Social Security in the long run. Democrats should embrace this new found concern among Republicans for the program, and up the ante by coupling the payroll tax holiday with lifting the payroll tax cap. Right now, income over $110,000 is exempt from the payroll tax. Do away with that cap, and you help make sure that the lowered contributions from people who will never have more than $110,000 in income in a year don't get hit now. It's a win-win.

The tax cut was fully offset by money from general revenue so that the trust fund was unaffected by the tax cut.

Therefore, Social Security is now dependent on a certain amount of money out of the normal budget. Before, the Social Security Trust Fund was entirely separate. It never needed general revenue money and therefore didn't contribute to the general revenue deficits. Now, to a small extent, it does.

The R's are trying to have it both ways, because they have always lumped Social Security in with the general funds when talking about deficits and "entitlement" spending. Now they're opposing an extension of the payroll tax cut on the basis it defunds SS.

But the D's are also trying to have it both ways now by putting forth the argument that reducing the taxes paid into the SS Fund will be offset by revenue increases elsewhere in the budget.

So, which is it? Is SS a stand-alone program that is solvent for another 30 years or so and solvent indefinitely if the cap on income is lifted, or do we mix SS funds in with everything else?

"replacing revenue the Social Security Trust Fund would have lost from lower payroll tax receipts with money made up from either alternative revenue sources or spending cuts"

So is that "money made up" going to be placed directly into the SS fund?

If so, that's mixing SS funds with general revenue, and it can be argued by the other side that what can go in can also come out.

If not, then it is an egregious "simple depletion" that is not made up after all.

The "mixing" (or lumping together) of money (revenues & deficits, including SS) has been the R's framing of the issue all along. They dismiss the solvency of the SS Trust Fund by lumping the payroll taxes together with all revenue and talking about SS payments to retirees (current and future) in the context of the larger deficit issue. They conveniently ignore the "structure of the program" you refer to.

Sorry, No

You and the president are allowing that argument to be made by those who would destroy Social Security.

That is evidenced by your inability to answer my question about where the lost revenues are coming from and, most importantly, HOW revenues from other sources will be added to the SS Fund. IMO it is vitally important to keep both SS revenues and expenditures separate from other revenues and expenditures. The structure of the program has to be removed from the general equation of budget deficits.

I'm not opposed to a payroll tax cut -- IF it is made up by lifting the income cap on contributions. THAT is where the Social Security equation has to be balanced -- NOT by spending cuts and tax increases elsewhere. Spending cuts and tax increases elsewhere are part of the equation to reduce the deficit, independent of Social Security. Mixing the two is opening a door to lumping SS in with the rest of the budget, and THAT is the beginning of Social Security's demise.

Then how do you explain this:

"Each of the plans under consideration is fully paid for, replacing revenue the Social Security Trust Fund would have lost from lower payroll tax receipts with money made up from either alternative revenue sources or spending cuts."