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Protecting Social Security: Payroll Tax Cut Fight Edition

by: Michael Conrad

Mon Jan 30, 2012 at 00:55:22 AM EST

With the fight over a longer-term payroll tax cut fully underway, and the themes of economic security and tax fairness at the forefront, now is a good time to take a step back and look at just how much Republicans have been getting away with.  
Michael Conrad :: Protecting Social Security: Payroll Tax Cut Fight Edition
GOP operatives have expressed confidence about the outcome of this fight. If their confidence was based on a belief that voters agree with them, it would be something to laugh off. On tax fairness in general, the specific payroll tax cut fight, and the directly related fight for Social Security, the GOP is thoroughly beatable. But one of the points the bullish Republicans have made is, uncharacteristically for the reality-averse GOP, not without merit. One Republican insider told National Journal that "Democrats rarely know how to make use of a strong hand." The GOP insider pinpointed a dynamic that grassroots Dems are all too familiar with.

It's not that there haven't been encouraging moments as of late. The payroll tax cut fight is a good access point to the broader debate over fair tax rates -- a debate that helps crystallize Republican priorities in the minds of voters. Fewer Democrats are shying away from populist contrasts. This is all good. But the recent movement in the right direction could very well prove to be fleeting. If recent history is any indication, the case for populist contrasts and confrontation will have to be made repeatedly. There are actors inside the nominally Democratic establishment (read: Third Way) whose relevance depends on elected Dems not learning the right lesson. If those hopelessly stuck in their interpretation of the 80's and 90's have their way, the recent mini-payroll tax cut victory will amount to little more than a short-term political win based on questionable policy. Those who speak in earnest about restoring a broad middle class have to do away with the notion that clearing low bars is enough to get us there.

The payroll tax/Social Security fight has two fronts. One is making the GOP pay the full political price for being their middle class wrecking ball selves. The other is an intraparty struggle to keep one group of Democrats that is out of step with core Democratic values and the country as a whole from blowing up the core of the party and offering up the rubble to the gods of delusional "centrism." It's progressives, populists, and mainstream Democrats vs. those who embrace Social Security cuts.

Note: In an attempt to avoid anything that could be rightly characterized as Monday morning quarterbacking, all of the points made in this post were also made in real time.

Team Blue

2011 wasn't a good year for Congressional Dems, so the moment Speaker Boehner effectively admitted political defeat after the last payroll tax cut fight must have been a sweet one. If this short-term victory was a confidence builder for leading Dems, or a wake-up call to those who haven't been willing to engage the GOP in the knock-down drag-out fight that has been going on for years and will continue whether our side finally internalizes it or not, that's a welcome development. But this isn't some great victory, and I think Democrats do the party and its goals a tremendous disservice if we tell ourselves that it is.

The skepticism of the payroll tax cut expressed in progressive circles is warranted. Defenders of Social Security are justifiably torn here. The people and organizations looking out for Social Security are the same ones who, for the last three years, have been adamant that the unemployment crisis demanded strong and sustained action. Of course they're initially sympathetic to the argument that the payroll tax cut is all that is doable right now and at least it's something. But there is disagreement over whether the payroll tax cut really is the best that can be done and deep skepticism about the efficacy of the employer-side of the payroll tax cut. To be clear, we're not talking about an assessment that the employer-side cut is less than optimal; we're talking about an assessment that it's a dud.

Speaking only as a layman interested in the outcome, ideally I wouldn't want to see any part of the payroll tax cut taken out of the economy at this time. However, if the employer-side cut is utterly ineffective, that part of the otherwise important payroll tax cut/unemployment insurance extension package isn't worth further jeopardizing Social Security politically for, especially after the "Grand Bargain" fiasco of 2011.

While the payroll tax cut doesn't jeopardize Social Security as far as funds go, it does make the program more vulnerable politically by fueling the perception that Social Security contributes to the deficit. And there were better options than the payroll tax cut identified in real time. Namely, the Making Work Pay earned income tax credit, which would be at least as good politically as the payroll tax cut. Making Work Pay might as well be an ongoing policy and election theme for Democrats. Making Work Pay also fits in with the Obama Administration's desire to elevate ideas Republicans have supported in the past. The counter-argument to going with Making Work Pay was that the right would label it a second stimulus. They did this anyway with the payroll tax cut and every other recovery effort they have opposed (all of them). A key takeaway from this, if it hasn't been made perfectly clear by now, is that when elected Democrats move toward right-wing Republicans they get little to no credit for doing so, either from the GOP or media outlets addicted to false equivalency. Results trump positioning.

The progressive reluctance to back all of the payroll tax cut comes from a recognition that the language that has been used while arguing for the payroll tax cut is sure to surface whenever the temporary cut comes up for renewal again. If this is temporary, when is it going to end and who will end it?

The reluctance is also informed by recent history. While voters -- Democrats, Independents, and Republicans alike -- are adamant in their opposition to Social Security cuts, the GOP still sought them, as was to be expected. But the most prominent Democrat, President Obama, was far from a stalwart defender. More people would have been receptive to an argument that the Obama Administration had been sufficiently vigilant about the impact of the payroll tax cut on Social Security's political future if the president had stood up to the disingenuous rhetorical attacks on the successful program. Instead he joined in. He usually did so in a more measured way than the right, but he repeatedly misled audiences about Social Security; giving cover to the right-wing/Wall Street goal of cuts that set a precedent for further efforts to unravel the program.

The president's pursuit of Social Security cuts is not something that can be credibly denied. There is a lot of reporting that establishes that the Obama Administration wanted needless cuts and went to absurd lengths to get them as part of a package. Some combination of Speaker Boehner ultimately refusing to deal, the emergence of the 99% movement, and perhaps the White House realizing that Social Security cuts are irreconcilable with the brand of Democrat that does well in key general election states like Ohio and Wisconsin (as well as the Democratic appeal in Florida) prevented the deal from happening. But the outcome doesn't erase a troubling reality: needless Social Security cuts were put on a table they never should have been in the first place and were kept there for a long time. The rubicon hasn't been crossed, but clearly drawn lines have been.

With the more populist Obama back in the general election spotlight, some contend that the Social Security "Grand Bargain" folly should be forgotten about, at least until after November. I think this is a seriously misguided approach. Social Security has determined attackers and it needs determined defenders, cuts are toxic with working class voters the president and down-ticket Dems need, and cuts have the very real potential to fracture the Democratic Party -- on top of being wrong and bad politics independents of this.

Social Security is central to Democratic identity. It's at the core of what the Democratic Party is about and what it accomplishes when it's at its best. A Democratic Party worthy of its name is committed to protecting and truly strengthening Social Security.

As an example, look what gets top billing in the official "Brought to You By" Democratic Party poster: Social Security.

If Social Security had been cut as part of a Beltway deal, the rhetorical question to the elected Democrats responsible would have been something like this:

Our country hasn't been in this bad of shape in terms of economic security since the Great Depression. Yet despite this, you pushed through needless cuts to the 75-year plus success story that is Social Security. You did this as part of a deal that you claim addresses a problem. But Social Security didn't contribute to this problem. And this problem isn't the most pressing one we face. In fact, these cuts reinforce the austerity hysteria that makes our most pressing problem worse. Considering the overwhelming popularity of Social Security, how is such staggering political malpractice not a sign that you are fine with reducing the Democratic Party to a pathetic shell of what it has been, can be, and should be?

Let's be clear, the ones who are outside of the mainstream on this are those who support Social Security cuts. In this case, "'centrist' wingnut" is not a contradiction in terms.

President Obama appeared to be publicly backing away from cuts last September. More recently, the populist Obama that even his sometimes critics are fans of re-emerged in Osawatomie, Kansas. To his credit, the president utilized recess appointments to send Richard Cordray, the former Democratic Attorney General of Ohio, to head the CFPB (Consumer Financial Protection Bureau), and to ensure that there would be a functioning NLRB (National Labor Relations Board). These are concrete steps taken to rebuild the middle class, which by definition means that Congressional Republicans were going to completely freak out over them. Credit where it's due. This is all heartening.

Yet after the Kansas speech, the president gave an interview to 60 Minutes in which he again lumped Social Security in with Medicare, instead of talking about the real problem of rising health care costs.

And then there was the president's State of the Union address:

As I told the Speaker this summer, I'm prepared to make more reforms that rein in the long-term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors.

The speech had its good moments, but after considering what the president told Speaker Boehner last Summer, this sure looks like one of its worst. The first seven words are a clear nod to the White House-Boehner "Grand Bargain" deal that cut Social Security and did other awful things like raising the retirement age for Medicare before Boehner walked away at the last minute.

It's true that the president said "strengthen social security." Strengthen Social Security is the name of the coalition that is doing a great job of opposing deformative "reforms." They're the good guys/ladies. But this language has also been adopted by those who want to cut the program. Rarely will someone come out and admit in plain language that they're cutting Social Security. They say they're "strengthening" it or "securing it" or "saving" it. The group Strengthen Social Security means it. Regrettably, the president either doesn't or he has a much different idea of how to strengthen the program, that much like the Beltway bipartisanship unicorn-spotting expedition of the first three years of this presidency isn't going to lead to anywhere good.

The president could state unequivocally that Social Security cuts (like raising the retirement age and the chained CPI scheme that amounts to a benefit cut) would not happen as long as he is president. He could made the kind of case for Social Security that it deserves and we all know the president is capable of. (Of course he would have to mean it.) If the history of this presidency to date is any guide, this isn't going to happen. In fact, there's a strong case to make that, when it comes to cutting Social Security, mainstream Democrats have to make the Obama Administration not do it.

Putting Social Security on the chopping block is anathema to operational unity within the Democratic coalition and the progressive movement. Those who pushed this nonsense in the White House, if they were interested in safeguarding the retirement security of all voters and the values of those who voted for them once already and will do so again, would knock it off. They have more than earned any public criticism and private derision on this topic they've received. With that said, it's important to understand what, as well as who, put Social Security cuts on the table.

Social Security cuts are so stupid on a number of levels that pursuing them gives rise to explanations like the "show rivals" theory -- the idea that elected Democrats and elected Republicans agree on most things and the political opposition is just for show. While this theory significantly overstates the problem and envisions as deliberate things that are more subtle, the anger and confusion behind its rise is understandable. People rightfully want to know why Social Security is something they have to worry about with a Democrat in the White House. But there's a better answer than "show rivals.

Bubble Vision

How did Social Security cuts get put on the proverbial table in the first place? The Beltway bubble decided to prioritize the budget deficit. Bubble residents wanted something they could pass off as bipartisan, because inside the bubble, Beltway bipartisanship automatically makes something good. Inside the bubble Social Security is seen as relatively low-hanging fruit that can be included in a Beltway "Grand Bargain." An overwhelming majority of voters are opposed to Social Security cuts (strong opposition to the Democratic "give"). A similarly large majority supports things like the expiration of the Bush tax rates for the most wealthy (strong support for the Republican "give"). But inside the bubble, this Main Street bipartisanship doesn't register or is ignored.

Social Security cuts have a small but rabid and influential constituency. Case in point: Wall Street billionaire Pete Peterson, who funds the assault on Social Security and Medicare. Peterson doesn't like Social Security and never has. Cutting Social Security is to Peterson what "Obamacare" is to Michele Bachmann.

Peterson is aided by pundits who project their fetishes onto the electorate. David Brooks, who repeats Peterson's talking points and clamors for cuts, is part of a larger group that likes to claim that, despite all evidence to the contrary, the president would do wonders for his re-election bid if he explicitly endorsed the Social Security cuts put forward by Alan Simpson and Erskine Bowles of the failed Simpson-Bowles Commission. Brooks isn't alone. Andrew Sullivan wrote that if the president pushed for the cuts in Simpson-Bowles he would "regain the coalition he won with - and then some." This is a baseless assertion. What these pundits don't get or aren't willing to admit is that what they want to happen to Social Security is wildly out of step with the people who work and vote for Democrats and those who would consider doing so. While these pundits like to think of themselves as standing in contrast to the "left of the left," their warped view is rejected by progressives and the actual center.

Heaping mindless praise on Simpson-Bowles is all the rage in the bubble. Bubble residents do not seem to know that the only thing the commission produced was the proposal of its two co-chairs -- Simpson, the former Republican Senator from the downright tiny and extremely conservative state of Wyoming, and Erskine Bowels, a Wall Street Democrat who made $335,000 in one year at his perch on the board of Morgan Stanley. The co-chairs proposed a bad deal. But what is a raw deal to those outside of the bubble is a Grand Bargain to those inside it, because that's what the rest of the bubble is saying. The bubble's residents don't have to worry about things like retirement security and they apparently have no reference point other than what their fellow inane conventional wisdom-repeating relatively well-off people say.

This insularity went all the way to the 1600 Pennsylvania Avenue, where it enabled nonsensical ideas, both regarding policy substance and political strategy that held sway in the White House. As critics of the White House's Grand Bargaining have been pointing out for months, the theory behind the "Grand Bargain" was that once it was completed Bill Daley would learn from his trusty CNBC that the Confidence Fairy had magically fixed the economy, which would lead to the president being re-elected. Do you believe in magic? Bill Daley does.

As a bonus, the theory went, the president would become the person who "secured Social Security" -- by making it less secure. Apparently a couple of people in the president's inner circle actually thought this would make for good politics. Up until very recently, you could still catch an adviser on TV bragging about the president's willingness to do "tough things" on "entitlements."

Paul Starobin recently reported on Bill Daley's White House tenure.

It was Daley, with the president's backing, who reached out to the new House Speaker, John Boehner, in a series of moves all designed to culminate in a grand bargain between Democrats and Republicans on taxes and spending, including entitlement reforms. Daley sat down with Boehner for a get-acquainted, steaks-and-wine dinner at Bobby Van's Steakhouse in downtown D.C. in February, and then arranged for the "golf summit" in June at which Obama and Boehner, joined by Vice President Joe Biden and Ohio's GOP governor, John Kasich, came together for an 18-hole outing at Andrews Air Force Base.

With the U.S. government's debt ceiling in danger of being breached, the Obama and Boehner camps got down to hard talks aimed at reducing the deficit by $4 trillion over ten years. Multiple White House aides told me that Daley was the number-one advocate for a bold package including concessions on Democratic sacred cows. On the table were big-ticket items like raising the eligibility age of Medicare. Such a deal, Daley stressed, would boost "market psychology" and "increase profoundly business and consumer confidence" in the economy, as David Lane, his counselor, characterized his views in an interview with me. Others in the White House viewed a deal as a political risk for the president and possibly a policy mistake. But Obama ruled in Daley's favor.

What else contributed to this unrealistic theory gaining traction with a smart president? I'd be remiss if I didn't look at the Orszag factor. According to numerous reports, Peter Orszag, the Administration's first OMB (Office of Management and Budget) did a lot to shape the president's view of the budget. Orszag is one of the lead advocates of cutting Social Security, as seen is the Diamond-Orszag plan. It seems Orszag's view dovetailed with the president's search for supposed common ground, even when searching for this ever-elusive ground wasn't in the interests of a broad middle class or his own political future.

Orszag last August:

Peter R. Orszag, Obama's former budget director, advocates tripling the size of the payroll tax break - essentially wiping out the payroll tax entirely - and keeping the rate low as long as unemployment remains high.

Orszag's role shaping the president's outlook is part of what makes the payroll tax cut disconcerting. To the extent would-be Social Security cutters like Orszag would have factored in that the payroll tax cut undermines Social Security politically, everything they've said and written about the program suggests they would see making Social Security more vulnerable as a feature of the payroll tax cut, not a bug.

On The Attack

The conservative attack on Social Security is based on ostensibly exempting current and soon-to-be retirees from the hatchet, inventing a crisis, and convincing younger people that the invented crisis is imminent. Self-described centrists try to cast Social Security as equivalent to the Bush tax rates for the most wealthy so they can pat themselves on the back for going after both. That these self-proclaimed centrists compare an intensely popular program like Social Security and its advocates to a decidedly unpopular right-wing agenda and Grover Norquist says a lot about them.

Both the right and the self-proclaimed center conflate rising health care costs with Medicare and then try to drag Social Security into the conversation about health care costs and Medicare. Both groups pretend the word "cuts" is interchangeable with "reform." Two of their favorite "reforms" in name only are means-testing and raising the retirement age.

Means-testing Social Security and Medicare appeals to champions of the interests of the most wealthy because it helps the most wealthy claim to be contributing meaningfully; something they'll do to forestall much more consequential attempts to address grossly unfair tax rates. Means-testing also weakens political support for the programs among the wealthy in general (the people with the most political influence) by moving the programs closer to "welfare" territory. Finally, means-testing Social Security would have to cut into middle class benefits to achieve any real savings because of the administrative cost of said means-testing.

Raising the retirement age stands out in the pack of bad ideas and scams as the worst and most offensive. Its proponents, like Pete Peterson and Chris Christie, point to rising life expectancy since the original Social Security Act passed in 1935. This is highly deceptive. Life expectancy was lower back then because infant mortality rates were higher. But that's just the beginning of the deception.


- Life expectancy has risen more in working-age years than retirement years, which means that to the extent that Americans are living longer, they are also contributing more to Social Security.

- Although overall life expectancy is rising, lower-income groups have seen very little increase in post-65 life expectancy in recent years, and some research suggests that lower-income women may be losing ground.

- Slow wage growth and rising inequality are bigger problems for Social Security than increased life expectancy. Longevity gains for younger generations account for only one-fifth of Social Security's projected 75-year shortfall, while slow wage growth and rising economic inequality account for more than half the projected shortfall.

The attackers, even the supposedly Very Serious ones, have no problem with getting a little crazy. Indiana's Republican Governor Mitch Daniels, George W. Bush's OMB director, likes to say "deficit" and "debt" a lot. This causes the usual suspects to forget his record and fawn all over him. When he isn't busy saying his two words and responding to fan mail from Mark Halperin, Daniels likes calling Social Security a Ponzi scheme and coming up with new justifications for raising the retirement age, like when he raised the specter of replacement body parts. Yes, we must raise the retirement age because any day now we're all going to be riding on hoverboards with our seventh pair of legs, while Tweeting, using only our minds, about the glory of Leader of Earth Gingrich as he fundamentally civilizes the Zarulons so they'll stop interrupting our space honeymoons.

Republicans only care about Social Security to the extent they want to weaken it, privatize it, or end it without having to pay the political price. This is how privatizing Social Security becomes "personalizing" it. Paul Ryan, an Ayn Rand acolyte, isn't hellbent on fulfilling his dream of phasing out Social Security, he's just wishing for "reform." Sharron Angle wanted Social Security eliminated. Then she realized that language wouldn't play well in a general election and discovered a way to "save Social Security" (spoiler alert: privatized). Mitch Daniels isn't raising the retirement age, he's just pre-celebrating your new replacement body parts.

Attacks on Social Security are not difficult to respond to.

How We Win

  • Stand up for Social Security. It works. We're talking about an undeniably successful American institution that is vital to retirement security and has no business in a discussion about a problem it did not cause. Ideas like raising the retirement age constitute yet another raid on the middle class. Strongly oppose them and promise to fight the Wall Street-bankrolled attacks on Social Security at every turn.
  • Underscore GOP priorities When Republicans lie about Social Security we have a built-in response that puts them on the defensive and maximizes their political liability. They oppose making working pay, a surtax on incomes over a million dollars, and a tax on Wall Street transactions. One of their top priorities is permanently extending the Bush tax cuts for the most wealthy. The debate over tax rates -- who is paying what, what's fair, and what should should be rewarded, is something Democrats and progressives shouldn't hesitate to engage in. When Republicans, or anyone else for that matter, come after Social Security, highlight what they're doing and who they're doing it for.
  • Do what works. It's important to keep ideas that can spur the kind of recovery we need in the conversation, even though they may seem out of reach at the moment. These ideas include getting to work on badly needed infrastructure projects and keeping states from laying off police officers, firefighters, and teachers and doing other things that contract the entire economy. Let's not mistake the brand of defeatism that avoids the kind of policy we know works with pragmatism. The best answer to any allegation from the right is effective policy. They're going to call us every name in the book regardless of what we do. Their attacks only resonate if we don't get results.
  • Remember, Social Security has committed enemies -- a fringe group, but a high-powered one with a ridiculously outsized voice in our nation's capital. Social Security needs committed supporters who will fight every disingenuous attack on it and think ahead.

    To that end, here are important takes from three staunch defenders of Social Security.

    Joan McCarter:

    [H]ere's a suggestion to combat (Republicans claiming to be the true defenders of Social Security) and to actually strengthen Social Security in the long run. Democrats should embrace this newfound concern among Republicans for the program, and up the ante by coupling the payroll tax holiday with lifting the payroll tax cap. Right now, income over $110,000 is exempt from the payroll tax. Do away with that cap, and you help make sure that the lowered contributions from people who will never have more than $110,000 in income in a year don't get hit now. It's a win-win.

    Robert Kuttner:

    Subsidizing Social Security with general revenue is good policy. As long as the system is substantially financed by payroll taxes, the benefit still feels earned.

    The devil, of course, is in the details. Making up the Social Security gap with a tax on millionaires is a double win. It makes the tax system more progressive, and it starkly poses alternatives in a way that plays to progressive strengths.

    Dean Baker:

    There is no reason to think that once cuts were put in place that the elites won't come back for more. After all, those of us who remember the 2000 presidential race know that any improvement in the budget situation is an argument for more tax cuts. And tax cuts will inevitably mean that we will have more pressure in the future for budget cuts.

    The other important part of the argument for delay is the demographic fact that we hear repeated endlessly. The country is aging. The huge baby boom cohort is reaching the eligibility ages for Social Security and Medicare.


    With older people voting in much higher ratios than young people, there are not likely to be many politicians anxious to support cuts to the programs they depend upon. And, contrary to the stories of the Washington elite, the support of seniors for these programs is not driven by greed. It is driven by the fact that they recognize the importance of these programs in their own lives. They want to ensure that their children and grandchildren will enjoy the same security in their own age.

    The moral of this story is that we should celebrate the work of hundreds of thousands of people across the country who have blocked the Washington elite to cut Social Security and Medicare. And remember, the future is on our side.

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