July 10, 2010

THE UR WAS SUPPOSEDLY SHOCKED TO FIND OUT...:

Make Social Security Pay, Today (DONALD B. SUSSWEIN, 7/10/10, NY Times)

To stimulate the economy now with no long-term increase in government debt, Congress should therefore temporarily exempt a portion of wages from the Social Security taxes imposed on workers; at the same time, those exempted wages would not be credited in computing that worker’s future retirement benefits.

For example, a 40-year-old earning $50,000 and paying annual Social Security taxes of about $3,000 could see those taxes cut to about $2,000. The added $1,000 in his paycheck, along with similar amounts for other workers, could be a huge stimulus to the economy.

In the future, of course, there would be a price to pay: the growth in that worker’s retirement benefits would be slightly reduced — much as if he had taken off four months without pay.

But the emphasis should be on “slightly.” Because benefits are typically paid over decades, the cost of a temporary $1,000 tax cut would be spread over many years; it could amount to a reduction in annual pension benefits of less than $100. The holiday could even be limited to workers under the age of 55, to allow plenty of time for them to salt away a few extra dollars for retirement once the economy improves.

Best of all, the costs and benefits would be matched to each worker. Those who get a pickup today would pay it back later on. This way, the Keynesians would get their stimulus, and the deficit hawks could sleep better at night.


...how few "shovel ready" projects there were waiting for his stimulus dollars. The taxpayers are always shovel ready.

Posted by Orrin Judd at July 10, 2010 11:22 AM
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