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Keith Ellison asks Republicans to follow Reagan’s advice on Social Security

by The Big E on November 29, 2012 · 5 comments

As the negotiations begin to heat up over the so-called “fiscal cliff”, Rep. Keith Ellison (DFL-MN) and Raul Grijalva (D-AZ), co-chairs of the Congressional Progressive Caucus, sent a letter to all Republican members of Congress today. They ask them to remember the advice of President Ronald Reagan in regards to Social Security.

“Social Security has nothing to do with the deficit. Social Security is totally funded by the Payroll Tax levied on employer and employee. If you reduce the outgo [payments] of Social Security, that money would not go into the general fund to reduce the deficit. It would go into the Social Security Trust Fund.”

Watch:

After running up massive deficits under the Bush Administration, Republicans are pretending they are concerned about the deficit. How can their current stance be anything but political posturing? Where was their fiscal hawkishness when they voted to start two wars and lower taxes instead of paying for them?
Here’s their letter:

Dear Colleague:

For the last 20 years, Republicans have consistently cited President Ronald Reagan’s legacy as the basis of their party platform. As Congress approaches important deadlines at the end of this year, Republicans should listen to what he said during the Presidential Debate on October 7, 1984:

‘Social Security has nothing to do with the deficit. Social Security is totally funded by the Payroll Tax levied on employer and employee. If you reduce the outgo [payments] of Social Security, that money would not go into the general fund to reduce the deficit. It would go into the Social Security Trust Fund.

‘Social Security has nothing to do with balancing a budget or erasing or lowering the deficit.’

We’re asking Republicans to listen to President Reagan and take Social Security off the table in current negotiations.

give2attain November 29, 2012 at 10:12 am

If I remember correctly, the payroll tax holiday cost the general fund (aka deficit/debt) ~$240 Billion over 2 yrs.

http://www.motherjones.com/kev

http://jaredbernsteinblog.com/

And if we don’t raise the retirement age or raise the payroll taxes, the money will need to come from somewhere when the fund + contributions can’t keep up with the disbursements.

http://www.bloomberg.com/news/

Or am I missing something here?

minnesota_liberal November 29, 2012 at 5:42 pm

The discussion over Social Security (an earned annuity) is on the disbursement side, so the so-called payroll tax holiday is irrelevant.

 

give2attain November 29, 2012 at 6:04 pm

The statement is that Social Security is self funded trust and has nothing to do with deficits.

During the past 2 years of the payroll tax break, ~$240 billion was paid from the general fund to the Social security trust to make up for the lost contributions. (ie not self funded)  I picked the Mother Jones link to ensure I was credible on this.

Now I agree that Social Security should be a self funded pension plan. However we know that it’s balance + ongoing contributions are not adequate to pay its forecasted disbursements.  Therefore we either need to raise it’s contributions (higher payroll tax), make transfers from the general fund (wealth transfer) or cut it’s disbursements. (lower payments or raise age)

In other words the annuity pay out can not exceed the money placed in the annuity + investment gains.

ericf November 30, 2012 at 1:23 am

than borrowing from the trust fund? The payroll tax holiday is effectively just like having the trust fund buy treasury bonds, merely a mechanism for borrowing the money. The general treasury pays it back right away. So it’s not at all accurate to say Social Security adds to the deficit.

give2attain November 30, 2012 at 2:43 am

Historically the SS receipts exceeded disbursements, therefore the trust fund balance was growing and the trustees used the balance to buy special USA savings bonds.  When the receipts are less than disbursements, the trustees redeem bonds to make up the difference.

That means the general fund is just paying off debt that is owed to the trust fund. Like you getting cash from your savings account.

From what I understand, in this case they took ~$240 billion and shifted it from the general fund into the trust fund.  Like the bank putting more in your account.

The advantage was they could give the payroll taxcut to all workers without a negative impact on the trust fund balance or when it would run out.  The disadvantage was that it has to be paid for those that pay federal income tax.    

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