A few days ago, PBS New Hour’s Judy Woodruff was interviewing Nancy Pelosi defending the pending payroll tax cut deal, and she wondered if Pelosi was concerned about the resulting loss to the Social Security Trust Fund. Huh?
The impression she gave was that a 2 percent reduction in the payroll tax would mean that funds available for Social Security would be reduced by that amount. Pelosi either missed the point or chose not to correct her. Someone will set her straight, I thought, and no one else will be confused about this.
But on ABC’s This Week, today, Jake Tapper made the same mistake, twice, though ABC’s writeup obscures this. He was interviewing former Obama press secretary, Robert Gibbs and showed a clip of Senator Harkin speaking in the Senate about the bad precedent the deal set for the sanctity of Social Security. The clip, however, didn’t make the same point, so it was left to Robert Gibbs to clarify this point, but he didn’t. Gibbs said nothing about Tapper’s mistake, even though it’s fundamental.
Apparently, the Congressional debate and resolution about “pay-fors” has confused even senior White House reporters and national media anchors. There are two completely separate issues, and these reporters have them conflated.
First, what happens to the Trust Fund? If Congress reduces the employee payroll tax from 6.2 percent to 4.2 percent, does the loss in revenues become a loss in revenues going to the Social Security Trust Fund? No. In each case, all through 2011, through the two month extension this year, and now in the extension through 2012, Congress voted to use general funds to replace the revenues that would otherwise have gone to the Social Security accounts. The Trust Fund will not be depleted one dime because of the payroll tax cut.
Second, does the absence of a “pay-for” for this tax cut affect Social Security? No. When the general fund replaces the revenues that would have been provided by the payroll taxes if they hadn’t been cut, will Congress simultaneously reduce spending somewhere else to avoid adding to the deficit this year? Answer: No. That’s the “pay-for” issue, and when Speaker Boehner announced the GOP cave on the “pay-for” issue for the payroll tax cut, this is what he meant.
The two issues are completely different. The absence of a pay-for for the effect of the tax cut has nothing to do with whether the Social Security Trust Find is made whole. Congress made the Social Security account whole from the general funds, and whether Congress does a “pay-for” or not for this is irrelevant to what happens to Social Security. Social Security will be made whole, even though there is no pay for.
So what was Tom Harkin talking about? That’s a different issue, though sadly, Harkin’s statement is not a model of clarity. He’s muddling up issues, too. The concern expressed by some Social Security supporters is that by funding any part of Social Security through the general fund, you break the conceptual link between employee contributions (via payroll taxes), and the pensions they get through Social Security. It’s an earned pension fund; not a “welfare” program, as some might argue if the funding is via the general fund.
Supporters want to keep Social Security’s accounting separate to preserve its political support. Using the general fund, even for part or only for a while arguably changes the characterization of Social Security to one supporters fear will ultimately lead to it getting less popular support. It’s a legitimate concern, but it has nothing to do with whether or not the loss of revenues from a payroll tax cut has a corresponding “pay-for.”
Both PBS/Woodruff and ABC/Tapper owe their audiences a correction.



24 Comments

Not that this is all that difficult to do mind you. Willful stupidity is often their hallmark.
It wasn’t a “mistake”.
spot on post
our media could not find its behind with either hand without a PR handout from the GOP.
Using general revenues to pay the Trust Fund is a short-term replacement for raising the cap or increasing FICA taxes.
Scare crow is right on technical points. But the larger issue is the changing frame of what Social Security is and how it is funded. The wider movement in ruling class circles is to make defined benefit a “welfare” program to alleviate poverty and push the rest into defined contribution programs. The last two full paragraphs above are politically salient. the 2% issue is wonkery that won’t impact the direction of SSI. The stage is being set to convert SSI from a system of inter generational social solidarity to a welfare program for the poor and the vagaries of the financial markets for everyone else.
While you’re technically correct about general fund revenues being used to backfill, I believe that this strategy does present a threat to long-term SS funding. Why? Because much of the support for raising SS eligibility age comes from a desire not to have to raise general fund taxes (income and corporate) to backfill SS money that has been borrowed (in the form of Treasury bonds) to fund other government activities.
It’s really pretty simple: either raise taxes to repay this money as the Trust Fund T-bills become due, or reduce general fund expenditures for other areas, such as defense, education, science, NASA, ag subsidies, etc.
And your point about using general fund revenues changing public perception of the program is MONUMENTAL. FDR went to great lengths to insure that SS was an insurance program, not welfare, and we should go to equal lengths to make sure it stays that way.
Bottom line: why should we trust bought-and-paid-for corrupt DeeCee politicians to repay OUR money that we paid into SS for decades?
Really? Are you folks perpetrating this falsehood yet again?
For all intents and purposes there is no “Trust Fund”
* Interest on “Trust Fund” bonds comes from general revenues (income taxes).
* Whatever the SS tax doesn’t cover comes from general revenues (income taxes).
All SS benefits are paid from current SS taxes and general revenues (income taxes). There is no pot of bonds paying money from an independent source. So yes, when SS taxes are cut, income taxes make up the rest.
Any questions?
Ain’t going to happen. These are people who think that Mark Shields, Ruth Marcus and E. J. Dionne are left-wingers.
There was no reason to do a payroll tax cut and then replace the funds that would have went into the Social Security trust fund from general revenues. The funds from the general revenue could have gone DIRECTLY to workers without any fiddling with Social Security. In fact the payroll tax cut REPLACED something that already did that and that was better for lower income workers then the payroll tax cut, which was better for the wealthier since the previous stimulus didn’t help wealthier people.
So why did we adopt this originally Republican idea?
All of the discussion about pay-for and about whether it hurts the fund is beside the point. The real question is why did the Obama adopt a Republican idea that was less helpful for workers than what it replaced?
There’s only one answer. It IS a tactic in a long term strategy to delegitimize Social Security. Either Obama is in on this strategy or the Republicans were able to be so oppositional to the original stimulus and bullied Obama into it and he and his are totally naive to the long term strategy. Either way is NOT a positive view of him. I tend to think the former is true.
thing is, what Harkin was saying really (in my view) all that muddled or difficult to understand. so why the media reporting so crappy? that’s what i don’t get. why come?
Sounds about right to me.
Wouldn’t it be great if you, Scarecrow, and Beach Populist were able to go on NPR. Instead we get a parade of no-nothings. I have given up on NPR.
And, if obama gets a second term, that’s exactly what he’s going to do. And, if a republican wins the white house, they’ll do the same.
This is all too depressing.
You are mistaken on all points, though no evidence will shake your beliefs, so I will not respond to your indifference to facts again.
The SS Trust fund is established by statute. It is continuously credited with payroll tax receipts and also credited with interest on its surplus, which is loaned out to the rest of the US Government. That surplus is currently credited with about $2.5 trillion.
All Social Security payments (checks to beneficiaries) are debited against SS accounts.
Yes, it’s correct that the US could have just sent separate checks to each worker in amounts equal to the payroll tax cut.
They accomplished the same, in dollar terms, by simply telling employers to withhold less in payroll taxes and providing that difference directly to workers in their paychecks. So instead of a separate check from the US Government, those subject to payroll taxes get a larger paycheck from their employer.
i’m inclined toward obama being on the anti-social security side: when pelosi refused to create a catfood commission, he not only created one; he appointed long term foes to s/s as chairs. If obama wanted to do a tax cut, he could have called for a reduced withholding of taxes OR do as gw did and mail out $300 checks. And HE introduced s/s as a topic, there was never a legitimate reason to do so.
Also very true.
Obama seems unable to return to his 2008 campaign promise to remove the cap on wages and benefits by counting for tax and benefit the wages above $250,000, with a donut hole to exist between the current cap of $110,100 in 2012 and $250,000, with that donut hole disappearing as $110,100 rises over the years through inflation.
Granted he only made the proposal in response to Hillary pushing the idea.
But you would think that it could have been one of the few 2008 promises that he kept with the 2009/2010 Congress that the Democrats controlled – if he wanted it to be.
Do you really believe this fiction? Try this…
http://www.washingtonpost.com/business/economy/the-debt-fallout-how-social-security-went-cash-negative-earlier-than-expected/2011/10/27/gIQACm1QTM_story.html
SS bonds (surplus) will never be repaid.
They cannot be bought or sold.
Interest comes from income taxes as does shortfalls.
You can dress it up and take it out, but the central truth of SS is that it’s current benefits are completely and totally paid for by current taxation. There is no pot of bonds independently contributing money. It’s a sham, just like Obama’s offer to have insurance companies pay for contraception. The names may change but the cash flows don’t.
Book Salon up with Thomas Frank’s Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right hosted by Charles Pierce
LOL
right – so those bonds the SS fund owns when sold to China become real overnight.
I do love financial magic.
Maybe the GOP will let there special law to prevent SS from selling its bonds can be repealed – after all they don’t exist as a non-zero value asset and are worthless and anyone that says otherwise is “perpetrating this falsehood” of there being value in those bonds.
Consider this hypothetical…
What would be the net effect of Obama declaring a domestic default?
Since the US owes itself the money the effect is zero. Benefits on the other hand carry on, by being paid from SS and income taxes. Just like before.
Well, you sure burst my bubble.
I watched Tapper fill in for Stephanopolous this morning and my first reaction was “Gee this Tapper guy is MUCH better than Stepho.”
All the people mentioned in this post are too stupid to understand the not-subtleties contained herein.
Starting from a very low bar, that comparison.
A US Savings bond domestic default, default on all US Bonds owned by US Banks, default on all bonds owned by US investors, while honoring China’s claim on future tax revenue (which is what a bond is)?
Or are the only “domestic default bonds” the bonds the Social Security System Trust Fund owns because we do not like Social Security to have a claim on future FIT tax revenue – because the loan SS made to the rich is in those bonds, so that the Bush tax cut for the rich must never be repaid via higher rates on the rich (in a deficit world borrowing from China for that tax cut for the rich was avoided by having Social Security fund it)?
Or is it we just rather protect the rich than the current old folks and the future old folks because the rich really don’t depend of SS like a lot of non-rich folks do?
That sounds like class warfare of the rich on the non-rich.
By the way, I see you have a video, but if you ever need a picture graphic to use with any Jake Tapper story, just go here:
http://firedoglake.com/2009/03/21/come-saturday-morning-its-tool-time-with-jake-transparency-tapper/