By the time you read this, President Donald Trump’s latest economic stimulus plan may be largely forgotten. But it has revived an unpleasant idea that the right fringe has been peddling for years: killing Social Security and Medicare.
We speak of an executive order that would cut payroll taxes. Payroll taxes fund virtually all of Social Security and much of Medicare. Without this money, Americans would have neither.
Oh, but Trump says these taxes wouldn’t exactly be cut. Rather, they’d be “deferred” through Dec. 31 for workers making less than $100,000. Workers would be on the hook for the taxes at some later date.
Can you imagine slapping low- and middle-income workers with a bill for the back taxes? Neither can I.
Which explains why Trump says that he might actually extend the deferral or forget about collecting these taxes. As Stephen Moore, a member of his White House Economic Recovery Task Force, writes in The Wall Street Journal, Trump could sign a bill “to forgive these repayments.”
The obvious long-term goal is to destabilize funding for Social Security and Medicare. For Social Security, this would be a more direct hit than the right’s previous privatization schemes.
In essence, low- and middle-income workers are being offered a modest tax cut in return for considerable insecurity in retirement. This would seem a heck of a time to threaten beloved middle-class entitlements, but there you have it.
And here’s the con job: Trump could tell the Treasury to “protect” these programs by putting bonds into Social Security and Medicare in place of the lost tax revenues, Moore advises. After all, Barack Obama did that in 2011.
First off, Obama shouldn’t have done that. Social Security is especially sacrosanct precisely because the workers pay for it with their own taxes.
More importantly, Obama’s payroll tax “holiday” had an expiration date that was honored. Trump now talks about making these payroll tax cuts permanent – even as the other side of his mouth says tax collections are only being delayed.
As an economic shot in the arm, cutting, deferring or juggling payroll taxes would do little. After all, the people who pay these taxes already have jobs. Real economists, conservative and liberal, agree on this.
Today’s economic disaster revolves around those who have lost jobs or businesses during the coronavirus pandemic. Unemployment now stands over 10%, higher than at any point during the 2008 financial crisis.
Wouldn’t it be swell right now to have the $1.5 trillion that Trump frittered away in the 2017 tax cuts? They came at a time of very low unemployment and booming stock markets, so there was no need for deficit-exploding stimulus.
Mainly a means to funnel more money to the upper incomes, the cuts didn’t boost the economy for everyone, as was promised. In the quarter right before the virus hit, the gross domestic product grew a mediocre 2.1%. [Avert your eyes from what’s happening now.]
Or that $1.5 trillion could have been used to rebuild America’s infrastructure. That would have created good blue-collar jobs, and our roads and bridges would more resemble those of a rich country.
Aside from this devious ploy to weaken popular programs, the executive order has another flaw. The president doesn’t have the power to end a tax. Congress writes tax law, members of both parties are saying.
Moore holds that Trump could “pull an end run” around Congress. “He should declare a national economic emergency and announce that the Internal Revenue Service will immediately stop collecting the payroll tax,” he writes.
But here’s the deal: No Social Security payroll tax, no Social Security. No Medicare payroll tax, no Medicare.