First, have a listen to Charles Krauthammer’s very accurate description of the, “Payroll Tax Cut.”
We should always think of the early 2000’s as a period of great public education. No, not as in our public school system, which has gotten progressively worse since the implementation and expansion of the Department of Education, but as in the things we in the public have either learned about our political leaders, or should have learned about them. For years they told us that the Social Security deduction from our pay checks were not taxes that we paid, but merely contributions into our own separate retirement accounts. This year, we learned that this was not true at all. It is a tax, and what’s worse, it’s a regressive tax. We were told recently that there was some sort of magic lock box where this money was kept, separate from all of the rampant irresponsible spending our elected leaders participate in for the express purpose of bribing us into reelecting them. We finally had it proven to us, that this is most certainly not the case, but that the money is part of our government’s general fund, and has been all along.
I know there are many out there who will look at this article and exclaim, John, the Republicans voted for this too, and you are one of them. Let me make this one quick point before we move on. I am a conservative who believes either rightly or wrongly that in general, Republicans are more likely than Democrats to represent my ideals and values. I am beholden to my principles, and not the letter after someone’s name. With that out of the way, this compromise, born of political gamesmanship is just flat out wrong.
For those people who are going to argue that I should be in favor of any tax cut, because I am a Republican, let’s take a look at the economics of this one, past the slick sales messaging, and discover why Dr. Krauthammer referred to it as political crack. First off, it is very unlikely to have any effect at all upon job creation. Why, you may ask. Well, those people who own businesses, and are not W-2 employees will not be able to participate in the tax cut. It applied to deductions from W-2 wages only. So, the very group who might possibly have used the tax break, which is a pittance anyway, will not be able to take advantage anyhow. Secondly, if those idiotic $800 checks sent to every single American had zero effect on GDP, employment, job creation, etc., then why in the world would putting 5% of that into a smaller percentage of American’s pockets have any effect? We must also ask ourselves why not just cut the tax rates charged to every American as a part of normal business by similar amounts in similar brackets, which actually may have stood a chance at spurring economic activity, especially if it were made permanent rather than a temporary vote buying measure. (By this I mean, make the 10% bracket a 6% bracket, and the 15% bracket an 11% bracket, and so on. Do not cut the brackets which exist beyond the OASDI cap limits.)
Now Let’s Look at the economic damage done by this rotten idea. The Social Security System was already in big trouble, even before Barack Obama became President. The troubles with Social Security can not be blamed on President Obama, but on the fact that the system consists of two components, neither of which would have stood a snow ball’s chance in heck of getting passed on its own. The first component is a regressive tax scheme, where by poor people are forced to pay a much higher percentage of their wages into a supposed reserve of funds. The second component consists of a welfare scheme where the benefits paid depends not at all upon the needs of the recipient, but upon the accident of which industry the recipient spent a majority of his working life employed by. Currently, the system has $109 Trillion in unfunded liabilities. This means that the amount of spending which is written into the law currently, exceeds both the funds we now have available to us, and those funds we expect to have available in the future. Quite frankly, we need to do something about the spending side of the Social Security equation. Revenue is not the huge problem, unless of course we do something foolish. Foolish would include cutting off the revenue source entirely, such as is the case with a payroll tax cut for all W-2 employees. Bankrupting the system sooner than would have happened had we done nothing, and for a benefit that will do no real economic good is bad enough. To do this for no other reason than to boost the President’s temporary poll numbers by giving Americans the illusion of economic gain for 8 or 9 months while the can is further kicked down the road, conveniently until after the next election, is the height of cynical behavior. It’s not just the President who is guilty of this, although on this one terrible decision, he actually led for once, but it was also any and all Republican Legislators who went along with it. When you hear the words compromise or bipartisan, you are not wrong if anger is your immediate response. What’s worse of course, is that the President is actually out there taking a victory lap for this bit of malfeasance. It is a real shame that basic economics is not taught competently at the high school level.
President Bush was almost run out of town on a rail for suggesting that we move to a system which more resembled the Chilean system, one by the way that has a proven track record of success. Barack Obama is spiking the football for getting a suicidal approach passed. Our national politics have become the Twilight Zone, and Greece is our future should we fail to correct our course, and correct it soon. We have operated under the delusion in America for some time that our wealth and economic success were preordained. In fact, it was created by hard work and sacrifice of many who came before us, the foresight of our founders, and the free market system. We are capable of squandering that good fortune, and in fact are doing so at an alarming rate. Not one single action affected by President Obama so far has failed to hasten that decay of good fortune. This is no different, and that he is being applauded for it is especially scary. It means that we are indeed addicted to the political crack. America needs an intervention, sooner rather than later.
