Your last sentence says it all. I wonder if Obama understands this well enough to know he could be painting his own legacy with cuts or if he will just stagger into it.?

Damn, mall business will be down. That’s terrible. /s

It was the (already extended once) expiration of a tax cut. That is not a tax increase. And the temporary payroll tax cut is one that never should have happened if you care at all about the future of Social Security.

As I’ve said before…

The folks that are angry now are the folks that ignored the danger this cut presented to the political calculus behind Social Security’s dedicated funding in the first place. That calculus was laid out bu FDR himself, as recounted in Luther Gulick’s famous Memorandum on Conference with FDR Concerning Social Security Taxation, Summer, 1941:

In the course of this discussion I raised the question of the ultimate abandonment the pay roll taxes in connection with old age security and unemployment relief in the event of another period of depression. I suggested that it had been a mistake to levy these taxes in the 1930’s when the social security program was orgiginally adopted.FDR said, “I guess you’re right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

The payroll tax cut was always an ‘effin horrendous idea and an absolute failure with respect to either stimulus — see “Everything You Know is Wrong: Tax Cuts Don’t Work” for more on that — or the preservation of the earned benefit model which has kept Social Security safe from idiot politicians* on both sides of the aisle for more than seventy years.
I’m glad to see the payroll tax cut expire. It was bad politics and bad policy when enacted. It remains bad politics and bad policy now…except for those on board with the undermining of Social Security. A skilled politician by the name of Franklin Delano Roosevelt knew this when he set the system up. That calculus has not changed.

It disturbs me to no end that the Democratic Party and its supporters are playing the “tax cuts are great, tax increases are bad, and allowing a temporary cut to expire is the same as enacting a tax increase” game. That’s Republican ground. Dems occupy enough formerly Republican ground already. Damn if I’ll cede this territory that should be a stark difference between the Democratic wing of The Money Party and its Republican wing.

Repeat after me: The payroll tax cut was bad politics and bad policy when enacted. The payroll tax cut undermined the basic political calculus — a dedicated and politically untouchable funding mechanism that helped keep Social Security safe for seven plus decades — which was set up by FDR specifically so “With those taxes in there, no damn politician can ever scrap my social security program.” Why? Next sentence from the memo: “Those taxes aren’t a matter of economics, they’re straight politics.”

“And all this before there are further cuts to government spending and benefit programs.”

You do understand this was a cut in Social Security tax, right?

They should have insisted in a making work pay credit to offset the “increase.” I guess they couldn’t afford it after giving NASCAR, Disney, and Goldman Sachs their subsidies in the tax bill.

We are governed by morons with no grasp of economics whatsoever.

Laugh all you want. Anyone with any sense though knows that it isn’t business owners that actually create jobs but demands of goods and services from consumers.

The economy is about to get a crash course in exactly how much those “poor people who don’t create jobs” actually drive the economy much more than many think.

One part of the “fiscal cliff” deal that received little attention was the expiration of the middle class payroll tax cut. The tax increase occurred immediately and hit workers right in the paycheck.

While the lower classes may not drive the economy their spending does have influence:

[...]

While it is unlikely that the income tax increase on those making $450,000 will have any negative impact on the economy, the lower paychecks for the working class are likely to not only reduce consumer spending in the short term but shift the mindset of consumers towards more saving – a dangerous notion in a period of austerity and low growth.

In the table of multipliers that Mark Zandi presented to Congress in 2008, the payroll tax holiday had a multiplier of 1.29, while the Bush tax cuts had a multiplier of .29.

What that says is that hiking the payroll tax (i.e., letting the holiday expire) would take $1.29 out of the GDP for every dollar of revenue taken out of the pockets of the working class ($112 billion), while letting the Bush tax cuts expire would take only 29 cents out of the GDP for every dollar of revenue gained.

The revenue taken from the pockets of the working class by the lapsing of the payroll tax holiday amount to roughly $112 billiion, which means that it will cut the GDP by $145 billion, which is significantly bigger than the impact of repealing the entire Bush tax cut would have been.

They should of raised the standard deduction by 1800 bucks for single people making less than 35K or close to that and it would of made stimulative sense in the slower months of late winter early spring when the economy needs a boost. People in retail deal with ” I’m waiting for my tax refund ” every day right now. ” Deficits don’t matter “, Dick Cheney. And they don’t when every dollar you have is spent on necessities.

… X 2 … messing with SS dedicated taxes was a bad idea likely done because it was a easy sell politically which is what this Obama WH does time and time again … take the easy way and sell out …

This SS tax “cut” was a sideways attack on SS by Obama WH and those allied with Obama WH to weaken/debase SS. It opened SS to coming attacks by meddling with dedicated SS taxes with the long intent being to weaken SS and lay SS open to political attack(s) and attempts to demolish SS.

So when we see SS paycheck taxes now being put back in place it is being spun as “bad” tax “taking” — not as needed SS set aside taxes dedicated to long plan SS sustainability and build outs.

… imagine that

… completely unexpected

… didn’t see this coming

The media is spinning this payroll tax increase to assist our CORPORATE MASTERS in getting rid of SOCIAL SECURITY FOR THE LITTLE PEOPLE.

Only a DEM PRESIDENT AND VICE PRESIDENT could have pushed this through Congress. A REPUG PRESIDENT would have been blasted for this blantant
robbery of SOCIAL SECURITY funds.

The BANKSTERS are still trying to dilute SS so we can let them invest in equities and make TRILLIONS OF $$$$.

Our CORPORATIONS AND BIG BANKS own our PUPPET POLITICIANS.

I used to have this argument with David Dayen, so I continue it with you. This is not a tax increase!

This is a restoration of the working class RIGHT to benefit from their payments into Social Security. Any ‘blip’ on the radar that this reduction of their rights invoved as far as the economy is concerned is a spurious and false reading of actual wellbeing, since it erodes the participation of the ordinary citizen in the one guaranteed retirement income so many are presently falling back on.

I don’t know what Faustian bargain causes FDL to have this need to shrink the payroll tax, but let me tell you it vastly weakens your claim to be a progressive site.

As has been said many, many times, weakening the payroll tax system that involves workers in a meaningful way in their demands upon their government and has been a sensible way to prepare for whatever may come in future, because it is a mandatory deduction for that very purpose is just another way for the very rich to suck away at our rights as citizens.

Please stop braying this mantra.

None of the main bloggers at FDL believe that Social Security should NOT be funded by a payroll tax or that payroll taxes for Social Security and Medicare should be eliminated. The “mantra” you think you hear is NOT that the payroll tax is “bad” but that — no matter how you label the policy — a policy of taking cash from those who would spend the cash immediately will in fact reduce demand in the economy.

The main post is not an argument to eliminate the payroll tax, it’s a warning that the loss of demand that will automatically result from restoring the payroll tax should be restored through other government spending. I know you agree with that.

Levy FICA on dividends and capital gains and toads like Mitt won’t be paying 14% tax rates on their millions, AND it would mean no more financing problems for SS and Medicare. In fact, we could probably increase retirement benefits by half and LOWER the Medicare age to 55, where it belongs.

the numbers do work to accomplish your first sentence. We do need to increase both the amount of Social Security benefits and the size of the population covered by Medicare/Medicaid, which are the goals in your second sentence. I’m not sure the numbers work to achieve both of those goals to the extent you want (50% increase in Social Security, lower health insurance eligibility by 10 years).

Hear hear. This is a perfect example of allowing rightists to frame EVERYTHING. A return to previous tax rates after a temporary (and ill-advised) tax “holiday” is NOT a tax increase. (How many cube-dwelling stiffs do I hear complaining about this “tax increase” these days-right here in NYC, liberal hotbed?) Even if it were, is that necessarily a bad thing if it helps save SS? I’d rather pay a bit more and have a government that does some things for me than give virtually nothing and have a government that does nothing but maintain a security state and enforce contracts beneficial to the capitalist class.

But hey, apparently the Third Way really cares about us and our economy more than that crook, FDR, who just wanted to bleed us with taxes.

I think CBO scored the possibility of “Medicare for All” during the health insurance circus in 2009-2010 and I think CBO did find it to be feasible over the long term. We need to eliminate Max Baucus from the Senate first. Not to mention 148 Republicans in the House who apparently believe we are living in 1849.

I can’t believe you don’t know what you’ve written is a blatant sophism.

Sometimes it is advisable, nay good and appropriate, policy to “weaken demand” as you insist on always portraying it in the form of levying taxes to fund things like, say, SS. Other times, like the increasing of regressive sales taxes, it is not. I can’t believe you don’t realize that difference. It’s not incredibly subtle. Please stop with the rhetoric.

Yes, it is extremely important to restore the dedicated funding source for Social Security. I could live with the FICA tax being even higher (8%? 10%?) as long as offsetting adjustments were made in refundable credits such as EITC and in standard deductions and exemptions so that the lowest-wage workers did not suffer a net loss of disposable income. In fact, we could even shelter the first $44,000 of income from any FICA tax (roughly twice the poverty level), and start collecting FICA only from those earning more than $44,000. There are loopholes in such a sheme that would allow game-playing by some who want to be free-riders, but FICA revenues need to be increased, no doubt about it. Obviously, we should also abolish the upper limit on incomes subject to FICA tax so that salaries up into the millions of dollars per year would pay full freight to FICA.

As for rhetoric, I think that was coming from the commenter to whom I replied, not from me. I tried to nudge her to look at the economics framework of the main post. Nobody said anything about sales taxes in the main post or in her comment or in my comment. Or any other comment on this thread. You are the first to mention sales taxes. What do sales taxes have to do with this thread?

“1. The income gap is what makes some people rich and the rest of us struggle. The rich want the gap to grow, because the gap allows the rich to dominate the rest of us. Without the gap, there would be no rich and no poor.

2. The gap is large and has been growing, because the rich pay the politicians to make that happen, and because the rich own the media.

3. The rich rich bribe the politicians via campaign contributions and promises of lucrative jobs after the politicians leave office.

4. The politicians widen the gap by increasing such taxes as FICA, and by reducing benefits for social programs – all under the pretext that the government is running out of money.” and

“Only when you have your listeners nodding in agreement, should you begin to explain why the government is not running out of money, does not need to raise taxes, does not need to cut the deficit, does not need to borrow the dollars it creates and never, ever, ever should pursue austerity.”from

http://mythfighter.com/2013/01/23/mmt-to-make-your-case-begin-with-what-people-already-believe/

Is this a better way to introduce the need to eliminate FICA altogether? And taxing SS payments and making the payments more generous etc?

After all “the purpose of an economy is to improve the welfare of a population. Welfare can include many things, income, health, happiness, food, housing, education, also on and on.”

And how is it that steps 1, 2, 3, & 4, whose foreseeable threat should have forestalled them, arose? Capitalism in terminal crisis made these steps necessary.

Capitalism will end. Which successor do you prefer?