Jobs Bill A Mockery of Honesty in Government

Ignorance among the older population seems to be the biggest problem when it comes to solving the Social Security problem. People are blinded by the fear their SS checks will be reduced and they will starve. Many, most, never saved a dime for the future or had any idea about allocation of resources during their working lives. Many never even thought about what they would do when their jobs stopped providing income for their daily needs.

What the general population doesn't seem to understand, if the problem of funding SS now by reducing outlays for those 55 and under but those receiving benefits will not have any reductions, the Ryan Plan, the current recipients will have to understand, they might find they will have no check at all in the very near future. This does not register for a lot of people.

The Jobs Bill: Pretending to Fund Social Security
Source: Charles Blahous, "The Jobs Bill: Pretending to Fund Social Security," Economic Policies for the 21st Century, September 19, 2011

The president's latest "jobs" proposal would extend and deepen cuts in the Social Security payroll tax. Before this legislation is seriously considered, there needs to be greater understanding that it would take a major step toward transforming Social Security from what it has long been -- an earned benefit, funded by separate worker payroll taxes -- into an income-tax based system more akin to welfare, says Charles Blahous, a research fellow at the Hoover Institution.

While the Social Security system as a whole stands on financially shaky grounds, recent policy decisions greatly increase the danger of eventual collapse:

In 2011, Social Security, while technically "solvent," will run a $150 billion deficit of tax income relative to costs. This deficit swells the $2.6 trillion of debt that is already in the program's trust funds.

The payroll tax cut enacted last December was accompanied by a provision to funnel roughly $105 billion in general revenues into the Social Security Trust Funds, and this year's "American Jobs Act" aims to cut payroll taxes by a further $240 billion in the next year alone.

The policy decisions of the Obama administration in this regard signal a gradual transformation for Social Security funding: cuts to the payroll tax will simply be offset and made up for by transfers from general revenues. There is no discussion of how to cut spending or reform the program, but policymakers instead focus on how to shift funds to keep the system afloat in the short run.

These policy decisions should outrage voters on each side of the aisle.

First, they endanger the ability of Social Security to remain solvent without a dedicated and reliable source of revenue.

Second, the decision to reallocate funds from general revenues (largely income taxes) to Social Security in order to allow for payroll tax cuts creates yet another burden for income taxes to bear.

Long-term focus on these implications is necessary to evaluate changes to an institution as far-reaching as Social Security.
.