Payroll tax cut raises worries about Social Security’s future fundingSource: The Washington Post
December 30, 2011
By extending the payroll tax cut, Congress and the administration have quietly made a critical change in how Social Security is funded - one that some in Washington worry could undermine the program's foundation if lawmakers keep renewing the tax break.
For the first time in the program's history, tens of billions of dollars from the government's general pool of revenue are being funneled to the Social Security trust fund to make up for the revenue lost to the tax cut. Roughly $110 billion will be automatically shifted from the Treasury to the trust fund to cover this year's cut, according to the Social Security Board of Trustees. An additional $19 billion, it is estimated, will be necessary to pay for the two-month extension.
The tax cut is supposed to be temporary. But as squabbles over this issue and the Bush tax cuts have revealed, short-term tax cuts in Washington have a way of sticking around longer than planned, especially as economic growth remains slow and lawmakers are wary of raising anyone's tax bill.
The prospect of policymakers continually turning to the payroll tax as a way of providing economic stimulus troubles experts, some lawmakers and both public trustees of the Social Security trust fund. Their concern: that Social Security will lose its status as a protected benefit owed to every working American and instead become politically vulnerable, just like any other government program.
And as this year's debate about the nation's debt showed, nothing is off limits to the political brinkmanship that has come to dominate Washington.