Yesterday House Republicans introduced legislation to extend the FICA tax holiday–the main cause the Democrats are promoting these days–coupled with a number of other measures which The Hill summarizes here. The part of the package that has received the most attention is a provision directing the executive branch to approve the Keystone pipeline within 60 days, or else report the reasons to Congress. The GOP wins this one hands down, as there is no coherent reason to oppose the pipeline, which will be a substantial and immediate job creator.
But there are a number of other significant provisions in the House bill. It would strip Obamacare of $34.9 billion in implementation funding; extend unemployment benefits while gradually reducing the time for which they can be claimed; delay implementation of the EPA’s new boiler and incinerator regulations; freeze pay for federal employees; and more. Some of the provisions are a little silly, like barring millionaires from receiving unemployment insurance and food stamps. But on the whole it is a good package.
There are two things going on here, one superficial and one relatively profound. On the surface, this is all about politics. The Democrats, after decades of posing as the guardians of Social Security, have carelessly and out of political expediency undercut the financing of that program in a manner that is likely to be critical. Their only purpose is to be able to characterize Republicans as tax-raisers on the middle class. The Republicans properly refuse to take that bait and instead are going along with the Democrats’ “destroy Social Security first” ploy. This effectively takes the payroll tax extension out of play as a political issue, no matter how the Democrats may try to spin it.
But there is something more serious going on as well. If the payroll tax holiday extension passes–and both parties are now on record as favoring it–the dam will have been breached, and Social Security will be massively insolvent, not at some point in the future, but today. Many liberals have argued–I think correctly–that this is a decisive step that will probably doom the program in anything like its present form. Inevitably, with revenues grossly inadequate to pay benefits to all retirees, Social Security will be means tested. In other words, it will become a welfare program that provides a safety net to the indigent elderly. Will today’s young workers be willing to pay for forty years into a program from which they anticipate that they will get no benefit when they retire–unless, of course, they are planning on being indigent? No way. The consensus that has sustained Social Security will be broken, and the program will be just as popular as other welfare programs; which is to say, not very popular at all. It will be the beginning of the end of the welfare state as we now know it. (That trend, by the way, is prefigured in another feature of the House Republican bill, which would begin the means testing of Medicare.)
Is that prediction overstated? Perhaps. But no one doubts that the entitlement crisis is coming, and I don’t see how the contemplated holiday extension can do anything but accelerate the process. Moreover, it puts the federal government on a path toward accentuating insolvency, not–as in the past–mitigating it.