But the weak economy has placed indirect pressure on the program as well, in that lawmakers have relieved workers of part of the tax burden of financing Social Security benefits so as to bolster near-term economic growth. Under this policy, over $200 billion will be transferred from the General Fund of the Treasury to replace foregone Social Security tax collections. In 2011, due in large part to this change in program financing, payroll tax revenue represented only 70 percent of total Social Security income. Lawmakers should carefully consider whether continued significant General Fund financing for Social Security could threaten to undermine long-standing public perceptions of the program as an earned benefit financed by workers according to contributory social insurance principles.
The Social Security Trustees warn of unintended consequences of the payroll tax holiday in their latest report. And read our brief analysis and summary.
U.S. As Charity Case – Move over Easter Seals, the national debt is becoming the hot new charitable cause. Billionaire Warren Buffett has promised to match the donations of any member of Congress towards reducing the national debt. He also agreed to match the $300 donation of a high school student. So, should Jerry’s Kids be worried? Economists have discussed how the mounting national debt could crowd out private investment, but will it also crowd out giving to charitable causes? Maybe the charity drives should be aimed towards curing a dysfunctional Washington.
Super Not So Duper – The word “super” has lost its luster lately. The failure of the Super Committee and the need for a super majority in the Senate to pass virtually anything have contributed to record-low approval ratings for Congress. Meanwhile, Super PACs are pouring unlimited funds into campaigns, resulting in even more negative advertising than usual and rising concerns that the political process is being distorted. We now pin our hopes on an event featuring a bunch of millionaires chasing each other up and down a field interspersed with high-priced commercials to restore the term to glory. But it will take more than Madonna at halftime to maintain our status as a super power. The fiscal decisions we make now will have much more impact on our global standing. Will debt be our Kryptonite?
1. Include policies to put in place, or move the country toward, a
comprehensive plan to stabilize and reduce long-term debt.
2. Ensure that the costs of any extensions are fully offset over a five
to ten-year period.
3. Put in place permanent solutions for expiring provisions where
The Conference Committee should not:
1. Make temporary stimulus or job creation measures permanent,
or make it easier to continue extending them in the future.
2. Dismantle the sequester or otherwise add to the deficit.
3. Rely on budget gimmicks for offsets.
Things the congressional conference committee negotiating the payroll tax holiday and other extensions should and should not do. Read more here
Playoffs in Full Swing – The Packers packed it in; the Broncos got busted; the Saints went marching out; and Houston had a problem as the NFL Playoffs eliminated more contenders in the annual march towards crowning a champion. Challengers were eliminated in the presidential contest as well as former Utah Governor Jon Huntsman backed out and more may fall away after Saturday’s South Carolina primary. Meanwhile, in Washington both parties continue to play off against each other as they vie for field position in the upcoming fiscal battles that will be pivotal in this election year. The House returns Tuesday to begin the 2nd Session of the 112th Congress and the Senate is back in town next week. The White House is busy preparing its FY 2013 budget request and State of the Union address. Will we see some touchdowns, or just more punts? Who will be Tom Brady and step up in crunch time to carry the day?
Congress fittingly capped a tumultuous 2011 by snuffing out yet another fiscal showdown while managing to kick the can of tougher decisions down the road. Both the Senate and House this morning approved, by unanimous consent, of a two-month extension of the payroll tax holiday and other various extenders. The most promising aspect of the whole ordeal is that the cost of the package was fully paid for (unlike last December’s tax deal).