Missing The Two Percent Story
The mainstream media is letting American taxpayers down, once again. Because there's a change coming in everyone's first paycheck of the new year that most of the news stories about the fiscal cliff negotiations only occasionally mention, and usually just in passing. But the impact will be widely (almost "universally," in fact) felt, and it's going to mean a pay reduction for all workers of two percent. Taxes are going up by this two percent, meaning paychecks will be smaller. And -- here's the important part that gets lost in all the breathlessness over the fiscal cliff by blow-dried newsfolks -- this change is going to happen no matter what gets agreed upon to deal with the rest of the fiscal cliff.
You would think that the news that everyone's paychecks are going to get smaller would be well-covered, but you would be wrong. So far, the stories have focused more on one single aspect of all the deadlines tied into the fiscal cliff -- the Bush income tax rates. These are the tax rates you'll find in the "tax schedules" you'll use to fill out your income tax form, and are the ones deducted from your paycheck as "federal taxes." Since the rest of the media universe is obsessed with this factor, we're going to ignore it here, for now. Whatever happens, happens. So be it.
Also looming (and also little-discussed in the media) are the spending cuts which will affect both social and military spending. The fact that the media has done such an abysmal job with this gigantic story is evident in polling which shows that most Americans think that if we do go over the fiscal cliff on schedule, then the deficit situation will get worse.
This is wrong. In fact, it is laughably wrong. It is wrong in two significant ways, as a matter of fact. First, the Bush tax cuts cost the government money. Trillions, in fact. There are three main options right now -- end all the Bush tax cuts, end the Bush tax cuts for the wealthiest, and continue all the Bush tax cuts for everyone. Nobody wants the first option -- which is what would happen if Congress and Obama do nothing. But if it did happen, suddenly our deficit problem improves by four or five trillion dollars over the next decade. If Obama gets his way, then our debt picture worsens by four trillion. If the Republicans get their way, then our debt problem worsens by five trillion (these are very rough figures, but close enough). So both parties are arguing for drastic increases in deficits and debt. And (amusingly enough) the Republicans are arguing to make our deficit/debt picture worse than those so-called "tax and spend" Democrats. Not that you've heard any of that in the media.
Now, see, I said I wasn't going to talk about all that, and then I went ahead and did so anyway. But it's necessary to put things in the proper perspective. But there's a second way the thinking of "if we go over the fiscal cliff then the debt gets worse" is utterly wrong. The other big part of the cliff is the spending cuts, or the "sequester" (in Washingtonese). If the cuts happen, the deficit picture gets better by a trillion dollars. If the cuts don't happen, then our deficit picture is worse by that same trillion dollars. So, to recap: if we go over the fiscal cliff, the deficit projections get better by something on the order of five-to-six trillion dollars. This is what the fight is about, folks.
But enough digression. I just had to get all of that off my chest at year's end here, because I've given up waiting for the mainstream media to point any of it out in any coherent way. Instead, let's get back to the subject at hand -- a change that everyone will feel immediately in their first 2013 paycheck. Because with all the focus on the Bush tax cut problem, not many folks are talking about the "payroll tax holiday" part of the fiscal cliff. By design. Because both parties have decided to throw this one under the bus, in the hopes that either nobody will notice (since the media certainly hasn't) or that the other side will ultimately be blamed by the public.
A little history is in order, here. When Obama got a stimulus package very early on in his first term, he got a $400 tax credit for most taxpayers ($800 for couples) added into the mix. For two years, you got an extra break on your taxes. The Republicans didn't like this, because Obama was actually getting some credit for cutting people's taxes. So they refused to extend the program. Instead, in the negotiations at the end of 2010 (when Obama agreed to extend the Bush tax cuts for two years), they came up with a "payroll tax holiday" instead, on Social Security taxes. Instead of having 6.2 percent deducted off the top of everyone's paycheck (this is the "FICA" deduction on paychecks), 4.2 percent would be deducted. Hence the two percent "tax holiday." Initially just a one-year program, Obama fought successfully to extend it for another year. Which puts us where we are now -- at the end of the two-year period.
When the idea was initially proposed, it faced the strongest resistance from the Left. Economists warned that once taxes are lowered, raising them again has proven to be all but impossible -- and if the 4.2 percent was left in place for any extended period of time, it would destroy the financial projections for the Social Security trust fund (which is not "bankrupt" in any sense of the word, by the way) in future years. These economists warned, at the time, that it was going to be very painful for politicians to raise this tax at the end of the "holiday" period, in fact. Which, again, puts us where we are now.
A good argument can be made that the payroll tax holiday has worked as intended, and given a slight boost to the economy over the past two years. At the same time, those liberal economists (with their "math" and all) are right -- this can't be a permanent tax reduction, it really has to go back up at some point, to make the Social Security trust fund projections work. An argument can also be made that the recovery is still so weak that another year of payroll tax holiday would probably be a good idea, too -- raise it back to 6.2 percent at the end of 2013, in other words. Or even that it'd be better to step it back up, by raising it one percent (to 5.2 percent) in 2013, and then the final one percent in 2014. These arguments are, from all signs, simply not being made in the fiscal cliff negotiation rooms.
Both Democratic and Republican leaders have indicated that they are willing to let the tax holiday end next week, no matter what the other negotiations come up with. You'd think there would at least be "Obama And Boehner Actually Agree On Tax Issue" headlines, but again, you'd be wrong. Because it is quite plain to see that nobody is fighting for the extension, it's a pretty safe bet right now that it is not going to happen by next week. Virtually every other aspect of the fiscal cliff might wind up being punted down the road to squabble about later, but this one seems destined to come to an end.
The media will likely wake up and realize this, right after it happens. There will be sensationalistic "How It Affects You" stories, no matter what gets decided on the fiscal cliff. Whether a deal is struck before the new year, whether a deal emerges right after the new year, or whether we go through the whole mess again in a month or two will change how individual Americans will be affected by the three-ring circus we call our government.
But one portion of this is not likely to change. It's a story that is so obvious that I can see it from the West Coast, in fact. The media could have been making a bigger deal about it for the past few weeks, but they've largely treated it as an insignificant detail in the whole fiscal cliff excitement. Here's a prediction for early 2013 -- the media will indeed wake up and start reporting on this story, but only after the fact. Everyone's taxes are going to go up the first paycheck in January, by two percent. Sit down with one of your paychecks and multiply your gross income by 0.02 to see how much money will not be there next year. Since the rest of the media isn't warning folks about this imminent change, I thought I would point it out to everyone.
-- Chris Weigant
Follow Chris on Twitter: @ChrisWeigant
Chris,
Doesn't all of this tie in with your 'scrap the cap' on social security taxes?
What if the payroll tax holiday continues - or this rate is even lowered - but the cap on social security taxes is scrapped?
Wait. I don't think that made any sense ...
... my comment, I mean ...
Once again, the 1% screws over the Middle Class with the assistance of a pliant media...
Michale
0578
Michale,
I don't know ... the congressional Republicans seem to account for more than 1% ... well, they sure act like they do, anyways. :)
The media is largely inept and incompetent, regardless of what part of the political spectrum it ostensibly caters to.
I think one reason it's easy for the American public not to care about the payroll tax cut is that the vast majority of America never realized it happened due to it not being widely publicized.
-David
BTW, as an interesting aside, CW, did you see the piece Nate Silver penned yesterday?
http://fivethirtyeight.blogs.nytimes.com/2012/12/27/as-swing-districts-dwindle-can-a-divided-house-stand/
Thought this was another excellent piece of analysis explaining some of the zaniness in the House.
-David
I don't know ... the congressional Republicans seem to account for more than 1% ... well, they sure act like they do, anyways. :)
Doubtful..
I bet if we actually researched the facts, Congress in general would make up the vast majority of the 1%...
The media is largely inept and incompetent, regardless of what part of the political spectrum it ostensibly caters to.
On this, there is no disagreement. :D
Michale
0580
i wouldn't mind paying a little more if it meant that the millionaires go back to a more reasonable rate. while i certainly don't want it to happen if it isn't necessary, the more i hear about this fiscal ski slope, the more i think it wouldn't be all that terrible.
i wouldn't mind paying a little more if it meant that the millionaires go back to a more reasonable rate. while i certainly don't want it to happen if it isn't necessary, the more i hear about this fiscal ski slope, the more i think it wouldn't be all that terrible.
The problem with this line of thinking is that it indulges in a process that the Left "claims" it is against..
Profiling....
Michale
0586
The problem with this line of thinking is that it indulges in a process that the Left "claims" it is against..
Profiling....
Ironically enough, this profiling goes beyond fiscal/tax issues.
Practically EVERY issue that the Left is hysterical about these days involves profiling of groups that the Left despises...
Thereby, once again, proving beyond any doubt that the Left has more in common with the Right than they have differences..
Michale
0587
"profiling?"
i don't follow how a progressive tax rate (instead of regressive, which is what we have now) qualifies as profiling, which is defined as: "the act of suspecting or targeting a person on the basis of observed characteristics or behavior." if someone makes millions of dollars a year, i don't suspect them of anything, or target them for punishment. then again, i'm not "the left," so i can't speak for them.
in order for your statement to be true, taxes would have to be pre-defined as punishment or harm, and that's not how i define them. taxes are civic duty, and if you or i come to make substantially more money than 99% of society, the percentage that we owe society for helping enable us to reach that income ought to be higher, not lower.
when marginal tax rates are higher at higher income brackets, the country's economy has prospered. when they are lower at higher brackets, the country suffers. certainly we need to spend less on things that aren't necessary, but we also need to pay enough to meet our obligations, and currently those of us who have the most pay a lower percentage than those struggling in the middle.
i don't follow how a progressive tax rate (instead of regressive, which is what we have now) qualifies as profiling, which is defined as: "the act of suspecting or targeting a person on the basis of observed characteristics or behavior."
It is "profiling" in the context that it lumps very diverse groups of people into one lumped group..
For example, the Left treats the group of people who make $251 thousand a year the same as they treat people who make $250 million a year.
In the lexicon of the Left they are all "The Rich" and should all be castigated and ripped off equally.
It's profiling in it's most basic form..
Now, don't get me wrong.. You know me. I am a BIG fan of profiling. It's a vital tool in the CT field and it is exactly why the Israeli SOP guys are so good at their jobs..
But, like so many lines that SHOULD be red for the Left, my only comment is that the Left castigates profiling from the Right in the service of this nation's security, yet embraces profiling in the name of furthering a political agenda.
Michale
"In the lexicon of the Left they are all "The Rich" and should all be castigated and ripped off equally."
again, that's pre-defining taxation as punishment or harm, a priori. if there were a war, is conscription through a selective service draft also profiling? is that also harm? is the draft "punishment" for being young and able-bodied? is jury duty punishment?
again, that's pre-defining taxation as punishment or harm, a priori.
It could be construed that way, if a specific group is targeted... As is the case in the here and now..
The STICK IT TO THE RICH mentality.. The Left tried to obfuscate it by calling it "Their Fair Share".. But THAT fell on it's face when the facts are the Rich pay more taxes than anyone..
Regardless, profiling doesn't necessarily have to involve punishment or harm..
"the act of suspecting or targeting a person on the basis of observed characteristics or behavior."
Nothing in there about harm or punishment. The ACT of singling out groups based on characteristics or behavior is what is "profiling"...
And the Left indulges in it all the time.
Whether it be the wealthy, gun owners or scientists who dispute the Human Caused Global Warming Yet The Planet Is Cooling theory...
The Left WALLOWS in profiling, yet doesn't miss an opportunity to castigate others for the process..
Michale
The STICK IT TO THE RICH mentality.. The Left tried to obfuscate it by calling it "Their Fair Share".. But THAT fell on it's face when the facts are the Rich pay more taxes than anyone..
the rich do not pay higher tax rates than anyone, on average they pay lower rates, especially the ultra-rich investor class. that is a fact, and the right-wing meme that the top 1% pay "more taxes" is misleading. whether rich or poor, some people earn what they have, while others get it by inheritance, luck, or less savory means. that the very top pay a WAY smaller percentage of their income (much less their WEALTH) is not fair to the rest of society. congress (both parties, mind you) has taken from the rest of us and given to the wealthy. that's not a knock on the rich themselves, it's a knock on our society for giving them more than they're owed and taking from them less than ought be required.
it's like conscription or jury duty. people have legitimate responsibilities to their families and communities, so we can't begrudge them wanting to do the best they can for themselves first. but by the same token, we as a society have to demand that those who are most capable contribute more for the good of the country, at least until the crisis has been averted. there need not be blame or suspicion, it's just an added responsibility that comes with the territory.
congress (both parties, mind you) has taken from the rest of us and given to the wealthy. that's not a knock on the rich themselves, it's a knock on our society for giving them more than they're owed and taking from them less than ought be required.
My point is, the Left has set themselves up as the arbiter of what is "fair"...
Yet the leadership of the Left are just as guilty of sticking it to the pheasants as the leaders of the Right are..
As you yourself point out...
Doesn't it make sense for the Left to clean their own House first??
Surely it makes preaching to the masses so much easier if they are not adopting a DO AS WE SAY NOT AS WE DO mentality....
Michale
there need not be blame or suspicion, it's just an added responsibility that comes with the territory.
Agreed.. In theory, there need not be..
Yet, as we have all witnessed, the practice from the Left was to demonize those who were financially smarter and more successful..
Once again, if the Left wants to preach from a stable moral ground, it behooves them to clean their own first...
Something about stones and glass houses comes to mind... :D
Michale