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Saturday, December 3, 2011

Who's Killing Social Security?

                     "Outwardly you look like righteous people, but inwardly
                       your hearts are filled with hypocrisy and lawlessness."
                                                                                   - Matthew 23:28

President Obama, in the swing state of Pennsylvania, again pitched his proposal to extend the payroll tax holiday. The Republicans have steadfastly refused to give in to the president who wanted to offset the cost of the payroll tax suspension with additional taxes on those earning $1 million.

By proposing a short-term relief to the working class, Pres. Obama gives all the appearances that he is fighting for the little guy. What he is not saying a word of to his audience is that the Payroll Taxes  pay for the Social Security and Medicare taxes (otherwise known as Federal Insurance Contributions Act (FICA). Most American workers are not aware of this fact. Payroll taxes also cover the federal and state unemployment insurance  taxes. Employers are required by law to withhold/pay for these state and federal taxes in behalf of their employees.

Last year, President Obama created the Simpson/Bowles Commission, more formally known as the National Commission on Fiscal Responsibility and Reform, to identify and propose policies "to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run." When the Commission released its report, it proposed to cut government services, defense and entitlement - including Social Security (which eats up 20% of our 2010 budget) , Medicare and Medicaid (which combined with CHIP take up 21% of our 2010 budget) and raise revenues by eliminating tax loopholes that depress the nation's tax collection. The Congress voted it down and the president hardly lifted a finger to implement a single proposal from the Commission's report, which was released in December 1, 2010. The president simply did not have the appetite anymore to address the ballooning budget deficit. After all, the mid-term elections were over. The Commisssion was just a ruse for him to avoid talking about our fiscal problems and making the hard choices. There was no way that he would touch the entitlement programs, especially with his own reelection coming up in 2012.

This year, a six-member Super Committee was created by Congress to identify spending cuts and put together a deficit-reduction package. Bipartisan in membership but hyperpartisan in their positions, the committee was a super failure. The Republican offered to increase revenues by closing the tax loopholes but the Democrats would not budged on their demand that entitlements be left alone.  Even in the face of  94.3% debt-to-GDP ratio, the two parties could not come together to put our financial house in order. Politics always rules in Washington.

The Democrats are also proposing to extend the unemployment insurance benefits which are set to expire this year. The Congress has already pushed it to an unprecented length of time of 99 weeks. The unemployment insurance is also funded by the payroll tax, which an employer pays for.

Things just do not make sense in this White House. On the one hand, we have this Payroll Tax that keeps Social Security, Medicare and the Unemployment Insurance afloat. Social Security alone is projected to go bankrupt in 2036. On the other hand, we have President Obama on a campaign trail pushing for the suspension of the very source that funds these costly, unsustainable programs yet he is stubbornly unwilling to do anything to reform or fix them. At the same time, he continues to demonize the "millionaires" (the employers and job-creators, in reality) for not doing their "fair share".

Talk about killing the goose that lays the golden egg.

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