On Wednesday, President Obama reiterated his push to extend the existing payroll tax holiday through 2012 – a move objected to by members of his own party who fear the reduction in revenues will undermine Social Security.
“I think that it makes perfect sense for us to take a look at, can we extend the payroll tax, for example, an additional year,” Obama said during a lengthy press conference at the White House.
On Friday, Democratic Reps. Lloyd Doggett (Texas), Ted Deutch (Fla.) and Mark Critz (Pa.) sent a letter to all House Democrats saying the proposed extension “should trouble all who care about preserving” the funding stream for Social Security.
“Social Security’s popularity comes from the direct contributions of American workers, who pay into the system now and benefit when they retire or become disabled,” the lawmakers wrote.
“Unless and until faith in Social Security has been restored to the American people through long-range solvency, short-sighted cuts to the program’s revenue stream must not be part of any debt ceiling or budget deal.”
The letter is also being distributed to select House Republicans, Deutch spokeswoman Ashley Mushnick said Wednesday. The Democrats are also readying a similar letter to send to Obama.
While the cut is just 2 percentage points – from 6.2 percent to 4.2 percent – it represents a real payroll tax reduction of 32 percent.
For instance, a worker currently earning $100,000 should have paid $6,200 in payroll taxes for 2010 wages, but will pay only $4,200 for earnings this year.
A difference of $2,000 that will not be circulated into the Social Security account.
The Congressional Budget Office estimates the cut will reduce federal revenues by $112 billion over the next two years.
Since the tax package is not offset by changes elsewhere in the budget, the government will have to borrow to fill that hole in the Social Security trust fund.
Social Security is already at a loss. It is clear that more people will be drawing on funds that are not available.
We cannot afford to draw down from Social Security even more. We must find other ways of revitalizing our economy without kicking the Baby Booming generation in the teeth.
Copyright (c) June 30, 2011. All rights reserved.