A Bit Of Social Insecurity

When simpletons like me go nosing around in reports on government, the conclusions can be pretty ignorant. So let’s revel in some bliss!

This article talks about the debate over whether or not to extend this year's payroll tax cut beyond 2011.

We normally pay 6.2% of our income to fund Social Security. In 2011, evidently at President Obama's urging, this was cut to 4.2%.

So the good news is, Americans making $50,000 per year got to keep an extra $1,000.

The bad news is, Americans put $1,000 less into the Social Security fund. That means that, all else being equal, in the long run either benefits will be reduced, or the fund will run out sooner. And it is starting to run out - for the first time in history benefits exceed income for the program.

I’d generally say that "tax cuts" are good when they translate into reduced government expenses. They don’t sound as good when they merely shuffle around money that’s ours to begin with. In this case, it gives us something like an advance on our Social Security “allowance” that would come due around age 67.

On the other hand, those of us who’d rather not contribute funds toward a program that’s currently being managed into a deficit might feel a little more secure about having the $1,000 in our pocket. To self-insure, as it were. I can take that $1,000, for example, and buy an annuity that will accomplish much the same thing: guarding against the chance of outliving my income.

So while it is off-putting to read an article dotted with Congressional quotes and none that acknowledge the long-term impact of cutting a Social Security funding source, I do land on the side favoring the extension of the tax cut. In fact, I like Mitt Romney's idea of cutting the employer's half of the contribution as well. A company paying out a million dollars in salary could gain an extra $20,000 per year - enough to hire another employee and help feed another family.

Thanks Mr. President!