Advocacy / AMAC In The Media

Tactical Desire Supplants Strategic Good in Payroll Tax Cut Debate

AMAC’s Founder, Dan Weber

– From The Hill 1/26/12 – Prior to the December 1941 attack on Pearl Harbor, Japanese Admiral Yamamoto – the architect of the assault on Pearl – held serious reservations about his ability to continue pressure against the United States, even if Japan scored an early tactical victory. In fact, Yamamoto expressed his anxiety by declaring, “I can run wild for six months … after that, I have no expectation of success.” The rest, of course, is history.

Critical to remember though, is the real lesson of Yamamoto’s prophetic stance: There is always danger in valuing short-term tactical victories over long-term strategic imperatives. Unfortunately, this warning recently went unheeded in Washington DC, whereupon Congress and the administration agreed to extend the Social Security payroll tax cut for two months. Despite the ways in which the tax cut threatens Social Security and despite larger concerns about fiscal responsibility, elected officials passed the extension anyway, basically allowing a short-term gain to overrule the long-term good.

While many argue that extending the Social Security payroll tax cut is essential to promoting economic vigor, doing so is not without significant cost. In fact, for the first time ever in the history of Social Security, roughly $110 billion from the U.S. Treasury will be transferred to the Social Security trust fund to finance the first payroll tax cut from 2011. An additional $19 billion is now required to cover the two-month extension just passed. What is more, 20 members of a bipartisan conference committee have been chosen to determine how to pay for a potential year-long extension in February when the current two-month vehicle expires.

Beyond the limited, temporary reduction in taxes, there is really no reason not to let the Social Security tax cut expire. Simply, reducing income to the Social Security trust fund – given that the program is already facing insolvency – is a perilous plan from the get-go. And let’s face it, the Social Security tax holiday does not really give extended relief, build consumer confidence, or promote sustainable growth when it is extended for only two months!

Certainly, raising taxes – or restoring higher tax rates – in a stagnant economy is risky policy. But there are other solutions. For example, rather than a modest 2% payroll tax cut that subjects a major entitlement to sizeable risk, why not consider a 4% across-the-board income tax reduction? Not only providing substantive tax relief, this would be a more responsible measure, particularly since tax decreases should originate from general revenue sources, and not be finagled from Social Security.

There is growing support for substantive and responsible reform. In fact, the 250,000 member Association of Mature Americans (AMAC), recently conducted a poll on this very issue; when asked whether members thought the Social Security tax cut should be extended, 95% of the 2,000 respondents said eliminate the break! Clearly, AMAC members are worried that repeatedly passing last-minute, economic band-aids should not trump the solvency of Social Security. AMAC’s poll results are especially notable given that slightly more than half of AMAC’s membership are still working and would directly benefit from a continued payroll tax cut.

That being said, there are leaders in Washington who have indicated similar concern. Of note, Senate Minority Leader Mitch McConnell (R-Ky.) recently articulated the need for greater over-the-horizon thinking: “As we move into the new year, it’s crucial for everyone to realize that, once this temporary extension is behind us, the larger goal is to move beyond a discussion of temporary assistance and toward a bipartisan plan to get our economy moving again, reform the tax code and preserve and protect entitlement programs for future generations.” Indeed, a clearer set of priorities could not be stated.

The key question remains, will Congress and the administration follow the path of Imperial Japan and swap long-term stability for convenient tactical gain? Or will they truly do what is needed for the enduring interest of the country?

Weber is the founder of the Association of Mature American Citizens (AMAC), an organization that advocates for seniors by promoting commonsense government and offering discounts on insurance hotels, car rentals and other products and services.

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