By Robert Romano — A year ago, when Congress was considering cutting the payroll tax in return for extending current income tax rates, Americans for Limited Government President Bill Wilson thought it was a bad deal.
At the time, without offsetting spending cuts, he opposed the $120 billion hole caused by underfunding the Social Security program, along with extending unemployment benefits by $56 billion, calling them “budget-busters”.
Now, a year later, the lowered payroll tax rate is set to expire, as are the unemployment benefits. But not the current income tax rates. Those are not even on the table.
Yet congressional Republicans are merely disagreeing around the edges of how to extend the payroll tax rates and unemployment benefits, now accepting their inherent premise. Legislation the House has already passed basically gives the Obama Administration everything it has asked for — without offsetting spending cuts.
All told, the legislation is said to cost $180 billion, simply adding to the $15 trillion national debt that will very soon be larger than the entire economy.
Which, is an even worse deal than last year. At least then, the deal gave Americans the opportunity to decide via the 2012 election cycle what tax rates they prefer. Now, the deal is over to what degree Social Security shall be rendered insolvent.
Remarkably, Senate Democrats have not simply taken the House-passed legislation and ratified it, claiming victory. Instead, they have merely pushed through two-month extensions to provide more time to reach another bad deal.
Now, nobody likes paying taxes, and if most Americans had their druthers, they would prefer to keep their payroll taxes to save on their own, rather than “investing” in a bankrupt big government Ponzi scheme.
But these tax “holidays” are coming without any fundamental reforms that would allow younger Americans to opt out of the system meanwhile preserving benefits for current and soon-to-be retirees, and are pushing Social Security that much closer to the edge of insolvency.
That’s not just bad politics, it is bad policy.
Congress has completely failed to take a leadership role on entitlement reform, and instead has allowed itself to be ensnared in Barack Obama’s class warfare trap. Obama and Senate Democrats cleverly asked that the payroll tax cut extension be accompanied by an increase on taxes of the wealthy.
Should a deal fail to be reached, they plan on charging Republicans with wanting to raise taxes on the middle class but not on the wealthy.
So, Obama wants to bankrupt Social Security so he has a talking point on the campaign trail. At $180 billion, that might be the most expensive talking point in human history.
Fortunately, there is still time for Congress to take a leadership role on reforming entitlements, even if it is difficult to raise those issues in an election year. And the point they can make is that you cannot preserve benefits for current and soon-to-be retirees by underfunding them.
Even if Congress wanted to keep the payroll tax cut in place for another year, the least it could do is find equal, offsetting spending cuts so it doesn’t blow a hole in the budget. Right now, in the name of giving taxpayers a short-term holiday, government is using a credit card, leaving them with a bill that nobody will be able to stomach when it comes due.
Robert Romano is the Senior Editor of Americans for Limited Government.