The death knell of the social security contract

There's an aspect of the current payroll tax debate (circa February 2012) that puzzles me.  Democrats have become the leading sponsors of tax cuts, arguing that Republicans are threatening a tax hike if the Republicans don't agree to extend the payroll tax cut.  Strange days when Democrats are championing tax cuts and Republicans are seeking ways to "pay for" the cut.

Stranger still is the logic.  The payroll tax cut is meant to stimulate the economy, but many economists argue that the payroll tax cut is an inefficient means of stimulus.  It applies only to those who are working (on a payroll) and to many who don't need additional spending dollars.  Extending unemployment benefits is much more likely to be stimulative than the payroll tax cut, as people receiving unemployment checks are likely to spend all the check on near term needs.

The strangest issue of all about the payroll tax cut is what it means to Social Security.  The payroll tax is meant to fund the Social Security Trust Fund, to help pay benefits for social security recipients.  We know that social security is likely to pay out more in just a few years than it takes in, and depriving the "trust fund" of revenue by extending the payroll tax cut simply makes social security more perilous.  Look again at who is championing the tax extension - Democrats, who have traditionally been the champion of Social Security.  This is cynicism at its highest level - championing Social Security while depriving it of revenues.  At least Al Gore had the decency to pretend to place the funds in a lock box.  Current Democratic leaders are depriving Social Security of needed revenues.

Will the Democrats argue that the payroll tax must be increased beyond normal levels when the economy turns around to recoup the revenue that is missing?  If I were a retiree drawing Social Security I'd ask a great many questions about the continuance of the payroll tax cut and what that means to Social Security.

What I think it means is this:  the beginning of the end of Social Security as we know it.  When even the Democrats argue that Social Security doesn't have to be "paid for" out of taxes, it becomes evident that Social Security isn't a "trust" but a social benefit program funded out of general revenues, subject to the whims of congress and its funding decisions.  A staunch supporter of Social Security in its present form should be horrified at the concept of a payroll tax cut, since those funds sustain Social Security.

If Democrats are willing to assert that payroll tax holidays are stimulus, and by extension that paying for Social Security benefits is not important, then the political party that has long been the staunch champion of the program is now arguing that Social Security has no special distinction over other government programs - it is a general revenue obligation.  Anyone who votes for a payroll tax extension does so acknowledging the death knell of the social security contract.

I'm a bit tired of hearing what we "can't" do in America anymore.  The truth is that we can do whatever we decide is important to do.  We are still the largest economy in the world, still lead in many factors of productivity and innovation.  While we have our challenges, there are plenty of people in plenty of countries around the world who would happily leave their homes to migrate here to live and work.

I'm tired of hearing about how we can't afford to send a man to the moon.  That's ridiculous.  We can afford to do whatever we decide is important.  I believe space exploration is important, more for the discoveries and new technologies than for the place of pride for being first to the moon or to Mars.

The coming 2012 election is important for this reason.  We need a clear direction and need to understand what people in this country want.  We can be a high services, high tax country.  We can easily tax everyone and everything more to provide more healthcare and more benefits from the government.  We can create new taxes to fund universal healthcare, or to restart the space program.  We have an economy large enough and a population wealthy enough to do whatever we set out to do.

We can alternatively be a low services, low tax country.  I believe this was the founding fathers' original intent, and that we were born on the idea of personal freedom and responsibility.  The US has never guaranteed equal outcomes, but over time has gotten better at equal opportunities.  Where else would a person who was an adoptee, a college dropout who was spectacularly fired from his first job become the most heralded icon of the technology world?  Steve Jobs, and others like him, represent what this country can produce.  Freedom depends on personal responsibility, and demands that each person is accountable for himself or herself and the consequences of their actions.

However, what we cannot be is a low tax, high services country.  For the last thirty years we have pretended to offer reasonable services to many constituents at low taxation.  Only rapid economic growth and immigration kept us from confronting what we now confront - a major choice in governmental funding and eventually the strength of our currency.  We are confronted by too much debt and too many deficits.  We must either increase taxes (which we can do) or we must reduce government spending and benefits (which we can do).

We forget that the income tax is a relatively recent phenomenon (less than 100 years old) and services like Medicare and Medicaid are not constitutional rights but outcomes of the Great Society (less than 50 years old).  We forget that marginal tax rates where in the upper 90s under the Kennedy administration.  In other words, little that we take for granted should be taken for granted.  None of it is original and none of it must be permanent.  We must continue to structure a government and a budget that reflects the needs of society and that reflects what we want from each other.  The status quo is unsustainable.

Left alone, medical care (Medicaid and Medicare), social security and other benefits will consume the vast majority of the budget within only a few decades.  At existing income levels and existing benefit levels we'll be a pension company with an army, to paraphrase another.  There will be no money for parks, education, roads and many of the other functions we believe a government should provide.  This is simply "math" as Obama likes to say.

The coming election should present a stark choice, but so far neither side seems willing to stake out a clear differentiation.  The Occupy Wall Street folks, along with their supporters and the more liberal commentators in this country are advocating for a high tax, high services direction.  Tea Partiers are arguing for what amounts to a return to more original governance, lower taxes and lower benefits.  The president sides more comfortably with the Occupy Wall Street and liberal commentator crowd, but can't or won't admit that even if we confiscate all the wealth of the "rich" that we'll still need a significant portion of the incomes and wealth of the middle class to pay for all the services we are demanding and they are promising.

The Tea Partiers demand a return to lower taxes, but don't admit this will inevitably mean lower government benefits, more independence and self-reliance.  None of the republicans running has attempted to draw the stark contrast.  We can be a high tax/high services country or a low tax/low services country, but we can't be a low tax, high services country.  We need to make a choice.  Either one is possible, given our strengths and our innate animal spirits.  But choose we must.