Social Security and Medicare are not entitlement programs! Those of us who are retirement age or rapidly approaching retirement age have been paying into Social Security since we first began working and Medicare since it was enacted. How much money has the average welfare recipient paid into welfare? What has the government done with the money we have paid into those programs over the years?
Yesterday Big Government posted an article about part of the deal that allowed the payroll tax holiday to continue for the year. One way to offset the cost was to increase the amount of money federal employees pay toward their pensions by .08%. First of all, the concept is false. The money that will not be taken out of your paycheck this year was supposed to go toward the non-existent ‘Social Security Fund’–not the general fund. All the payroll tax holiday is doing is hastening the demise of Social Security.
Meanwhile, the article at Big Government quotes the union leader’s reaction:
“Working class men and women who have dedicated their lives to serve their country should not be on the hook for solving a crisis they did not create,” American Federation of Government Employees National President John Gage said.
[…]
Continuing to attack federal employees’ pay and benefits doesn’t create new jobs and only adds to the pain and suffering many working class men and women are experiencing,” Gage said.
For the moment I am going to ignore the fact that federal workers make double what their counterparts in private industry make (USA Today 8/13/2010) and focus on exactly what the .08% means in actual dollars. If you, as a federal worker, were currently contributing $100 to your pension plan, you are now required to contribute $100.80. That small amount will save the government about $15 billion.
I don’t think 80 cents is an attack on working class men and women. If they are so unhappy with paying the 80 cents, maybe they should try to get a job in the private sector.
Fox News posted a story yesterday about exactly what was in the payroll tax extension bill passed by the Senate. It seems that the bill that the Senate passed was unworkable.
The article reports:
The Senate bill did not cleanly extend the current Social Security employee share of 4.2 percent for two months. Instead, it created a two-tiered payroll tax with a rate of 4.2 percent for the first $18,350 of income in those 60 days, with a 6.2 percent rate above that.
This establishment of multiple rates of payroll tax presents serious logistical challenges for payroll processors. In fact, the National Payroll Reporting Consortium strongly opposed to the Senate bill based on this feature, writing:
“The difficulty is in establishing a new Social Security Taxable Wage limit of $18,350 for the two-month extension period. More than ten percent of the workforce is likely to meet that limit, and would be subject to the higher 6.2% tax rate for earnings over that amount. However, many payroll systems are not likely to be able to make such a substantial programming change before January or even February. The systems affected tend to be highly complex, normally requiring at least ninety days for a change of this magnitude for software testing alone; not to mention analysis, design, coding and implementation.”
To me, that explains why the Senate did not simply pass the House version of the payroll tax extension–they were using the bill as an instrument of class warfare.
Please follow the link above to read the entire article. It explains the actual process that resulted in a workable bill being passed. This bill was a victory for the taxpayers and for the companies having to deal with payrolls. It was a small victory, but it was a victory.
This article was also published in the Worcester Telegram and Gazette this morning. It was also sent out by the author, Len Mead. I received it in my e-mail this morning.
Did you think Republicans would “raise your payroll taxes” starting in January if no deal had been reached? Do you think unemployment just dropped to only 8.6 percent?
If you answered “yes” to these questions, the Main Street media has succeeded in deceiving you — and most other busy readers and viewers. Like our economy, truthful journalism has sunk to lows unseen in our lifetimes.
Fortunately, dear reader, you have me to help you correct these misconceptions. Let me guide you — through truth — to understand what’s really happening as we celebrate what blessings we have left this Christmas and Hanukkah.
Let’s start with the bogus “payroll tax reduction” issue. You’ve been told if the current reduced amount isn’t “extended,” 140 million plus workers will have taxes raised over $1,000 next year. The truth is this payroll withholding is simply not a tax. It is an amount fortunate working people have set aside for their own retirement to fund Social Security.
So, when it was “cut” last year, it just further short-changed funding for promised Social Security payments which, not surprisingly, were insufficient to cover pay-outs last year for the first time in history.
The truth is that payroll withholdings for Social Security was never a tax, and it never should have been reduced, because now 40 cents of each federal dollar paid to existing Social Security retirees has to be borrowed.
When you buy groceries, do you borrow 40 cents of each dollar for food? That’s the truthful state our current retirement system has fallen to.
Real tax cuts are federal income tax rate reductions implemented by presidents like John Kennedy, Ronald Reagan and George Bush.
These real tax rate reductions all resulted in sharply higher tax revenues collected by the government due to a growing economy, with more jobs and more people being hired to pay taxes.
One could argue that the so-called payroll tax cut reduction implemented in the past was an intentional destabilizing effort by Democrats to make citizens further dependent on government — similar to now bankrupt Europe. But hey, we’re bankrupt, too, with a national debt topping — hold your breath — $15 trillion (see usdebtclock.org). Not ready to pay this debt bill? Well, surely your children and grandchildren are, eh?
The Main Street media is criminally negligent in not reporting this serious truth to us.
Moving on to the bogus reported “reduction” in unemployment: Folks, it just ain’t so.
True unemployment is rising — horribly. The “official unemployment rate” of 8.6 percent reported by the Bureau of Labor Statistics does not include desperate citizens who have given up looking for full-time work after months or years of failure. For example, if the same number of people were looking for work today as were looking for work when Barack Obama took office, the unemployment rate would be 11 percent.
But the true unemployment figure is even worse.
The more accurate Labor Department unemployment figure is not the “U-3” 8.6 percent figure but really 15.6 percent, which includes “total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”
Estimates of the number of unemployed by this measure exceed 25 million desperate people in the U.S. out of about 153 million working. Again, the Main Street media seems criminally unwilling to report this truth to us, or to report the possible solutions for improving our economy and thus the number of available jobs people wanting to work could seek.
Fortunately, many sources for these truths exist for curious, open-minded citizens anxious for real solutions to the problems of our economy.
Solutions include real reductions in government spending and regulations, lower and certain taxes for the future, and the repeal of Obamacare, which is a cancer on businesses who simply cannot hire anybody without knowing what future real costs will exist with each new hire.
When these steps are taken, our great free economy will again explode upward — with new jobs, new tax revenues for public needs, and real new hope for the future. Our still-free republic is still our greatest blessing now at year’s end.
Len Mead can be reached at mead1720@gmail.com
Yesterday the Daily Caller posted a summary of the payroll tax cut bill that recently caused so much hand wringing in Congress. The bill that was passed was pretty much what was suggested at the beginning of the negotiations (except for the two-month limit).
The Daily Caller reports:
—Retains through Feb. 29 the current 4.2 percent rate for Social Security payroll taxes paid by 160 million workers, instead of letting the rate rise to 6.2 percent on Jan. 1.
—Renews federal benefits averaging $300 a week for the long-term unemployed through Feb. 29.
—Prevents 27 percent cut in Medicare payments to doctors; extends other health care fees through Feb. 29.
—Requires President Barack Obama to approve construction of the Keystone XL oil pipeline from Canada to Texas within 60 days unless he declares the project would not serve the national interest.
—Price tag of $33 billion. Paid for by increasing home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration by one-tenth of 1 percentage point. The fee is passed on to home buyers and will apply to many new purchases and refinancings starting Jan. 1. For a $200,000 mortgage, the fee increases a borrower’s cost by about $17 a month.
—Requires House and Senate leaders in both parties to name negotiators to work on a bill extending the payroll tax cut for a year, extend federal jobless benefits for the long-term unemployed and keep Medicare payments to doctors at their current level.
I guess I am wondering why we need a committee to extend the bill for a year. The gang of twelve didn’t work out too well, so why are we doing this again?
Charles Krauthammer posted an article today at National Review about the bill passed yesterday in Congress allowing a 60-day tax break for Americans. First of all, it is not a tax break–it is a raid on Social Security at a time when Social Security can least afford to be raided. Second of all, no sane government sets a two-month tax policy.
The Republicans had the right argument on principle–the tax cut needed to be for the full year, but they lost on the politics. The reason they lost on the politics is that most Americans were paying more attention to their Christmas shopping than to what was actually happening in Congress, and when the media (and the Democrats) told them that the Republicans were holding up their tax break, they believed it.
Dr. Krauthammer states:
To begin with, what even minimally rational government enacts payroll-tax relief for just two months? As a matter of practicality alone, it makes no sense. The National Payroll Reporting Consortium, representing those who process paychecks, said of the two-month extension passed by the Senate just days before the new year: “There is insufficient lead time to accommodate the proposal,” because “many payroll systems are not likely to be able to make such a substantial programming change before January or even February,” thereby “creat[ing] substantial problems, confusion and costs.”
He further states:
The House Republicans’ initial rejection of this two-month extension was therefore correct on principle and on policy. But this was absolutely the wrong place, the wrong time, to plant the flag. Once Senate Republicans overwhelmingly backed the temporary extension, that part of the fight was lost. Opposing it became kamikaze politics.
The responsibility for this debaucle ultimately rests with the American people (and the fact that the media was failing to report both sides of the story). If we have truly reached a point in our history when we are tired of politics as usual, then we need to be willing to do something about it. We need to pay enough attention so that politics cannot trump good policy. Until that happens, we will get more of the same.
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Tampa Bay Online is reporting today that the House of Representatives has voted 229-193 to reject the Senate’s proposal for a two-month extension of the payroll tax cut.
The article reports:
The House vote, 229-193, kicks the measure back to the Senate, where the bipartisan two-month measure passed on Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid, D-Nev., says he won’t allow bargaining until the House approves the Senate’s short-term measure.
OK. Let’s take a look at this. The Republicans in the Senate need to be taken to the woodshed on this one. First of all, a two-month extension of a tax policy is totally ridiculous. Companies need time to program their payroll software, they need some certainty in the future to allow them to plan expenses. The Republicans in the Senate fell right into the hands of the Democrat politicians on this one. Harry Reid left town in order to avoid negotiations. He knew that the House would reject this bill–this is the Democrat way of avoiding the Keystone Pipeline and blaming the Republicans for the middle class tax increase that is coming.
There will be no payroll tax cut extension. In itself, that is not horrible. (Don’t panic. I am not for higher taxes, I just don’t like the way this was done). The payroll tax cut comes out of the “Social Security Fund” (which is nonexistent)–not the general fund. The payroll tax cut ensures the demise of Social Security sooner rather than later. Raising taxes on millionaires, increasing the cost of mortgages, etc., has no impact on the money not collected because of the payroll tax cut–those things impace the general fund–not the social security fund.
Unfortunately, this battle is totally about politics and the American people are the losers. The correct answer to the entire situation would have been for Congress to pass a real budget–which it has not done for almost three years and proceed from there.
This article is based on two stories–one from The Hill on Friday and one from Power LIne today. Both stories deal with legislation drafted by House Republicans regarding the F.I.C.A. tax holiday extension requested by the President, the extension of unemployment insurance, and the delay of changes to the Medicare reimbursement rate for doctors. The House Rules Committee has scheduled a hearing on the legislation for Monday. This is the legislation that President Obama says has to be passed before he will go on Christmas vacation.
The problem with the bill, as President Obama and the Democrats see it, is the inclusion of a provision that directs the executive branch to approve the Keystone pipeline within 60 days, or else report the reasons to Congress. The details of the President’s previous actions regarding the Keystone Pipeline are detailed in a rightwinggranny article of November 10. For the President, the pipeline represents a dilemma–unions support it (it will create a huge number of union jobs) and environmentalist oppose it (it produces carbon-based domestic energy–that is not their stated reason, but that is the reason). To act on the pipeline before the November election is going to alienate one of those two groups.
John Hinderaker at Power LIne comments:
But there are a number of other significant provisions in the House bill. It would strip Obamacare of $34.9 billion in implementation funding; extend unemployment benefits while gradually reducing the time for which they can be claimed; delay implementation of the EPA’s new boiler and incinerator regulations; freeze pay for federal employees; and more. Some of the provisions are a little silly, like barring millionaires from receiving unemployment insurance and food stamps. But on the whole it is a good package.
For people trying to shrink government spending and create jobs, it’s a good bill. Politically for the Democrats, it’s a poison pill. Unfortunately this bill does nothing to create peace and harmony in Washington, so prepare to hear a lot of name calling on the Sunday news shows this weekend and in the mainstream media during the coming week.
The article at Power Line concludes:
But there is something more serious going on as well. If the payroll tax holiday extension passes–and both parties are now on record as favoring it–the dam will have been breached, and Social Security will be massively insolvent, not at some point in the future, but today. Many liberals have argued–I think correctly–that this is a decisive step that will probably doom the program in anything like its present form. Inevitably, with revenues grossly inadequate to pay benefits to all retirees, Social Security will be means tested. In other words, it will become a welfare program that provides a safety net to the indigent elderly. Will today’s young workers be willing to pay for forty years into a program from which they anticipate that they will get no benefit when they retire–unless, of course, they are planning on being indigent? No way. The consensus that has sustained Social Security will be broken, and the program will be just as popular as other welfare programs; which is to say, not very popular at all. It will be the beginning of the end of the welfare state as we now know it. (That trend, by the way, is prefigured in another feature of the House Republican bill, which would begin the means testing of Medicare.)
The Democrat Party likes the issue of extending the F.I.C.A tax holiday because if the Republicans oppose it, it looks as if the Republicans support raising taxes on the middle class while protecting ‘the rich.’ The fact that extending the F.I.C.A. tax holiday puts Social Security at greater risk and really does not significantly stimulate the economy does not really enter into the political discussion of the issue.
The root of the problem in passing this bill is not the bill or the additions to the bill–the root of the problem is that there is an election in November of next year. Unfortunately we have a bunch of career politicians on both sides of the aisle who are willing to put their re-election ahead of the good of the country. We need the Keystone Pipeline project to go forward for national security and economic reasons, and we need a middle class tax cut (although not out of the ‘Social Security Fund’, which in reality does not exist). It would be nice to see both sides work together for a change.
President Obama and the Democrat party are currently complaining that the Republicans really do not support tax cuts for the middle class because the Republicans are not supporting the extension of the payroll tax cut. That may be good for the campaign trail, but it really doesn’t tell the whole story.
On Sunday, the Business Insider posted the following:
Sen. Jon Kyl (R-AZ), the retiring minority whip, said he is opposed to extending the payroll tax cut — raising taxes an average of $1000 on American families and risking eliminating half-a-million jobs from the economy — because he is concerned about the longevity of Social Security.
“The problem here is payroll doesn’t go into general revenue, it supports Social Security, and you can’t keep extending the payroll tax holiday and have a secure Social Security,” he said on Fox News Sunday.
The problem with the cutting the payroll tax is that you are taking money directly out of Social Security, which is already in financial trouble. The government has gotten into the habit of manipulating Americans through tax policy–if you do this, you get a tax break, if you do that, we tax you extra. The payroll tax gives Americans the sense that they are getting something back, without explaining that they are helping destroy the future viability of Social Security. Again–the problem isn’t taxes–it’s spending, and until we deal with the spending (and excessive government regulations), the economy will not recover.
As much as I would love to have extra money in my pocket to spend, extending the payroll tax cut is a bad idea.
Merrill Matthews at the Wall Street Journal posted an article on Saturday detailing what has happened to three Texas counties that opted out of Social Security thirty years ago.
The article reports:
…Now, 30 years on, county workers in those three jurisdictions retire with more money and have better death and disability supplemental benefits. And those three counties—unlike almost all others in the United States—face no long-term unfunded pension liabilities.
Since 1981 and 1982, workers in Galveston, Matagorda and Brazoria Counties have seen their retirement savings grow every year, even during the Great Recession. The so-called Alternate Plan of these three counties doesn’t follow the traditional defined-benefit or defined-contribution model. Employee and employer contributions are actively managed by a financial planner—in this case, First Financial Benefits, Inc., of Houston, which originated the plan in 1980 and has managed it since its adoption. I call it a “banking model.”
If the states are laboratories for the federal government, I think we just had a successful test in the laboratory.
The article further points out:
If a worker participating in Social Security dies before retirement, he loses his contribution (though part of that money might go to surviving children or a spouse who didn’t work). But a worker in the Alternate Plan owns his account, so the entire account belongs to his estate. There is also a disability benefit that pays immediately upon injury, rather than waiting six months plus other restrictions, as under Social Security.
The concept here is that the money invested belongs to the person–not the government–that’s why the plan works!
The article also mentions:
The Alternate Plan could be adopted today by the six million public employees in the U.S.—roughly 25% of the total—who are part of state and local government retirement plans that are outside of Social Security (and are facing serious unfunded liability problems). Unfortunately this option is available only to those six million public employees, since in 1983 Congress barred all others from leaving Social Security.
Congress has been spending Social Security payroll deductions on other things. That is part of the problem. It is time to take the money out of the hands of Congress and give it back to the people it belongs to.
Maybe Rick Perry knows what he is talking about when it comes to Social Security–opting out of Social Security has worked in Texas!
People opposed to cutting government spending always threaten that if the cuts are made, very visible necessities will abruptly disappear. It’s an argument that goes on all the time all over the country. No one every says, “If we cut spending, five employees whose jobs overlap with five other employees will be terminated.” Well, it is the silly season in Washington, and the truth is on vacation.
Byron York at the Daily Caller posted an article yesterday pointing out that our budget problems have to do with spending–not entitlements.
The article points out:
There’s no doubt federal spending has exploded in recent years. In fiscal 2007, the last year before things went haywire, the government took in $2.568 trillion in revenues and spent $2.728 trillion, for a deficit of $160 billion. In 2011, according to Congressional Budget Office estimates, the government will take in $2.230 trillion and spend $3.629 trillion, for a deficit of $1.399 trillion.
The bottom line is that with baby boomers aging, entitlements will one day be a major budget problem. But today’s deficit crisis is not one of entitlements. It was created by out-of-control spending on everything other than entitlements. The recent debt-ceiling agreement is supposed to put the brakes on that kind of spending, but leaders have so far been maddeningly vague on how they’ll do it.
This issue could be an important one in the coming presidential race. Should Republicans base their platform on entitlement reform, or should they focus on the here and now — specifically, on undoing the damage done by Obama and his Democratic allies? In coming months, the answer will likely become clear: entitlements someday, but first things first.
There will be an increase in government expenditures as the baby boomers retire. Restructuring Social Security is probably a good idea–but it has to be done in a way that keeps faith with the people who have paid into the program all of their working lives. Social Security should never be ‘means tested’–that would make it another welfare program. The people who paid into it should receive benefits from it. Remember that those who may be financially well off probably paid more into Social Security than those who made less during their lifetimes. Therefore, to ‘means test’ the program would simply make it a wealth redistribution program–not what it was originally intended to be. A large part of the problem with Social Security is the fact that Congress has spent all of the money. There is a part of me that wants to force Congress to reimburse the Social Security fund with their retirement money. It seems only fair.
