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.