There Is No Immediate Crisis: Rich People Just Do Not Want to Pay Back Money They Borrowed from Poor People Via Tax Cuts
by: BruceMcF
Tue Aug 31, 2010 at 15:41:13 PM EDT
Shortly after its original establishment (1940, to be precise), the Social Security Trust Fund was set up on a Pay As You Go basis: except for a small buffer, funds coming in covered liabilities. But with demographic swings in the American population, and in particular with growing life expectancies, we looked ahead and saw that when the Baby Boomers started retiring, that would lead to a very high rate of payroll tax.So Tip O'Neill and Ronnie Raygun reached a deal, where the Social Security rate would be raised, in the early years the resulting surplus would go the General Fund to allow for up front tax cuts, and then when the rate fell behind obligations, the Congress would raise revenues to "pay back" the funds that the Social Security trust fund had lent to the General Fund.
Of course, now that it is nearing time to start paying back, this deal has stopped being a sweet tax deal, swapping higher regressive taxes that rich people do not have to pay for lower progressive taxes that rich people do have to pay, and is entering the flip side of the deal, where the progressive taxes are below Pay As You Go rates, and the funds lent to the wealthy in the form of tax cuts have to be paid back to cover the bonds in the Trust Fund.
Rich People enjoyed borrowing the money from the Trust Fund in the form of tax cuts largely for Rich People. While Borrowing, they were all for the deal. Now that it is time to pay back, they do not like the deal any more.
Now, if we had put this money into an infrastructure fund, we would have a massive amount of infrastructure projects now paying back and it would not be an issue ... but we decided to let rich people borrow it instead.
Because we listened to all sorts of BS framing about this deal ... framing mindlessly repeated by people like "Congressional Staffers" (and being a former Senate Staffer with the ability to repeat inside the beltway "expert opinion" is Lawrence O'Donnell's claim to fame) ... instead of seeing this as rich people paying back money they've been borrowing since the mid-1980's, its framed like Social Security is a private insurance fund that is threatened with "insolvency".
So that is the introduction: this is all about Rich People trying to renege on a borrow and pay back deal now that the pay back time is approaching. THAT is the "crisis", not the fictitious 2037 insolvency.
This article provides background on how the Social Security overpayments were rolled into the General Fund to pay for lost revenue that were caused by tax cuts for the affluent during the Reagan presidency.
Because of the the taxcap on Socal Security that is currently $108,500, the part of the FICA tax that funds Social Security is the most regressive federal tax there is .
This tax has been primarily borne by the middle class since the inception of Social Security and has provided a real sweetheart deal for the affluent because of the tax cap.
To add insult to injury, the Social Security over payments were used as a revenue source to provide tax cuts to the affluent.
See the rest of the story at http://www.hillbillyreport.org/diary/1930/odonnell-hits-a-social-security-foul-tip
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