Belfast Telegraph

Tinkering with social security safety net is a risky move

By Jim Dee

Lost in Washington's dust-up over the fate of a temporary payroll tax-holiday for 160 million working Americans was a subtle reality: the New Deal-era social security pension scheme has taken another hit.

Until last December, US workers contributed 6.2% of their pay to social security, a figure that was matched by employer contributions. Last year's deal, which has now been extended, dropped the employee's contribution to 4.2%.

On the surface, the extension of the payroll (social security) tax-holiday seems like a win for Obama and the Democrats in Congress, who'd lobbied hard for its continuance.

And that victory could factor into next November's congressional and presidential elections, during which Obama and Co will try to claim credit for securing another year of higher take-home pay for workers.

But it could be conservative Republicans who've scored the bigger victory - albeit with the energetic assistance of the leader of the opposition party.

Social security is one of the most enduring legacies of the programmes championed during the Great Depression by Franklin Delano Roosevelt.

Given America's earlier 'Red Scare' experiences of 1919-1920, FDR knew well that the programme had to be bought and paid for - with lifelong contributions from workers, which they could draw upon in retirement - in order to counter claims that it was a government charity scheme.

American conservatives have always detested social security and efforts to privatise it have popped up in one guise or another for decades.

The most high-profile recent drive came in 2005, when president George W Bush proposed the creation of private retirement accounts, which would have given workers the option of retaining social security deductions and investing in the stock market. But Bush had to drop the idea in the face of strong public opposition.

Social security has always existed outside of the federal budget, funded instead by direct worker and employer contributions.

In fact, so successful has its funding stream been that, since 1982, it has run annual surpluses of between $89m and $190bn.

But now, according to opponents of the payroll tax-holiday, the latest deal has compromised social security's ring-fenced status.

The Obama administration initially secured the current payroll tax-reduction last December as part of a trade-off deal with Republicans to extend Bush-era tax cuts that disproportionately benefit the wealthy. However, in arguing for the payroll tax cut extension this year, Obama and Co claimed that a failure to renew it would represent a huge tax hike on working people.

It is a message that has resonated widely. For example, a recent Associated Press-GfK poll found that the public supported the payroll tax cut extension by a 58-35% margin.

Social security defenders now worry about a slippery slope effect, wherein Congress and the public become conditioned to accept more tinkering with the programme's income stream, thereby opening the way for future cuts that could fatally cripple the programme's future.

Social security is not without its problems, but it remains extremely popular among Republican, Democratic, and independent voters. A recently published report indicates that the safety net it provides may be more important than ever. According to US Census Bureau data, nearly 50% of Americans are now either living in poverty, or have incomes that leave them officially classed as low-income.

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