One of the worst compromises contained in the $858 billion tax bill just passed by Congress and signed by President Obama is the provision that reduces your Social Security payment by 2% for one year (from 6.2% rate to 4.2%).  It’s been called a tax “holiday,” a payroll tax cut for working and middle class, etc.  It equates to about a single person earning $50K a year getting to keep an extra thousand; a couple earning $100K keep $2K, etc.

It sounds good to most ears, however, the FICA tax (as it’s called on your pay stub) still must be paid for. To make up for that shortfall, Congress agreed to foot the bill for what has always been a worker’s share of the payroll tax that funds this crucial social program.
 
Sounds generous, doesn’t it? However when this holiday is over, Republicans and the echo chamber in the media will be calling it a tax increase and demand that the Democrats and President Obama extend it – or make it permanent.

Now, Congress doesn’t actually have the money to pay for this. It’s borrowing it. Which begs the question – for how long will Congress agree to subsidize our FICA payment with borrowed money?

And how soon after the Social Security fund is linked directly to general revenue for the first time in the 75 history of this program will conservatives – Democrats and Republicans – slash our benefits?

Already the Deficit Reduction Commission recommended we raise the retirement age to 69 and dramatically decrease benefits. This of course is much more damaging to working people than Rep. Jan Shakowsky’s plan to increase the tax cap – which would only affect upper income earners – and preserve our benefits for another 75 years.  But by directly tying Social Security funds to general revenues it’s fiscal health is implicitly connected to a failing economy. This is a disaster for any of us who would be senior one day.

Edward Coyle, Executive Director of the Alliance for Retired Americans had this to say about the compromise, “Seniors worry – with good reason – that relying on borrowed money could eventually force the Social Security program to compete with other federal programs for scarce dollars, leading to cuts.”