What’s Happening with Seniors Benefits

by Art Kelly

The staffs of legislative leaders in the House and Senate have assured conservative activists that any extension in the temporary payroll tax cut would be paid for by reducing spending--not increasing the federal deficit.

The payroll tax, which funds Social Security, was "temporarily" reduced from 6.2% to 4.2% during Fiscal Year (FY) 2011 at a cost of $112 billion to the Social Security Trust Fund with money from the Treasury used to replace this lost revenue.

The Huffington Post reported that Grover Norquist, president of Americans for Tax Reform, personally approved an additional increase in the deficit of $185 billion in order to extend the payroll tax cut in FY 2012.

But key staff members for Senate Minority Leader Mitch McConnell (R-KY) and Speaker of the House John Boehner (R-OH) were adamant that, if the payroll tax cut were extended, it would be paid for through equivalent reductions in the FY 2012 budget.

But The Hill reported that President Obama said it would be "irresponsible" to cut social programs to cover the cost of payroll tax relief.  Noting that the debt ceiling agreement that passed earlier this year authorized spending cuts, Obama made clear his unwillingness to reduce government spending any more.

"It would be irresponsible to now make additional deep cuts in areas like education, or innovation, or our basic safety net that are critical to the economy in order to pay for an extension of the payroll tax cut.  We're not going to do that," he said.

Senate Democrats want to further reduce the payroll tax at a cost of $265 billion, with this money recouped through a surtax on persons who make more than $1 million a year.

There is no evidence the payroll tax cut in 2011 helped the economy and may have even hurt it. Tad Dehaven of the Cato Institute writes, "Far from helping the economy, all this deficit spending is destabilizing financial markets, scaring businesses away from investing, and imposing crushing debt burdens on young people."

The Washington Post states that the issue is dividing the Republican presidential candidates.

Newt Gingrich, Ron Paul, and Mitt Romney support an extension of the payroll tax cut, while Michele Bachmann does not.

A recent issue of this newsletter recounted how, during the the Republican presidential debate at Oakland University in Rochester, Michigan, Romney wanted to extend the "temporary" one-year tax cut and Bachmann opposed it.

Romney said, "I don't want to raise taxes on people in the middle of a recession. Of course not."
 
Bachmann said, "I opposed it when it was first proposed, because I knew that it would blow a hole of $111 billion in the Social Security Trust Fund."

Bachmann repeated her opposition to the extension on Fox News Sunday.

"This is Barack Obama's idea. He said that we would create millions of jobs if we lower the payroll tax. That's not true. It didn't happen. And his administration admits it didn't work. So why would you continue a policy that doesn't work?," she said.

It is unclear what compromise might be possible on this issue, but The Hill states that Senate Majority Leader Harry Reid (D-NV) has threatened to keep Congress in continuous session until extension of the payroll tax cut is passed.

"We are not going home until we finish this.  Is it going to be embarrassing to Republicans, humiliate them?  Probably, as it should be," Reid said.

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