Top Democrat Identifies Another Threat To Social Security In Obama Tax Plan

An outspoken and respected House liberal is concerned that President Obama’s tax cut plan will pose more than one threat to Social Security.

Progressive advocates, and a wide swath of the Democratic party, oppose Obama’s call for a partial employee payroll tax holiday. Not because they don’t want workers to have extra cash in their pocket, but because they worry that a supposedly temporary payroll tax rate will become the new normal and jeopardize Social Security in the long run. Next year, they worry, Republicans will characterize allowing the holiday to lapse as a “tax hike” on workers, and Dems will be cowed into extending it.

Rep. Rush Holt (D-NJ) shares that fear. But even if things don’t shake out that way, he says, treating the funding mechanism for Social Security as a variable that can be tweaked to fund stimulus or reduce deficits will erode Social Security’s status as the third rail of American politics, and leave it vulnerable to future attacks from the right.“What they’ve done is put social security in a package with the Bush tax rates and the [Alternative Minimum Tax] fix and the estate tax and business expensing,” Holt said in a phone interview yesterday. “And it’s [become] something you deal: you take a little bit here, you give a little bit there.”

Holt worries that if Congress and the White House unite to turn the payroll tax into a budget item, then it’s only a matter of time before it loses its uniqueness, and then it will be susceptible to attacks from its long-standing enemies.

“Social Security becomes something we use to stimulate the economy, next year we’ll use it to balance the budget — it becomes another government program like the Endowment for the Arts,” Holt said. “Ever since 1935 there have been dedicated enemies of Social Security and the reason it has been able to withstand the attacks is that it is special. If that goes away, Social Security goes away in no time flat.”

Holt raised this objection to White House officials. Without naming them, he says they’ve basically blown him off.

“Of all the things the President seems to be willing to negotiate, I’m dismayed that the integrity of Social Security would appear to be one of them,” Holt criticized. “It must be because the advisers around him don’t have a s nse of history.”

His pleas, he said, “fell on deaf ears or was completely ignored.”

He raised these very concerns at a private Democratic caucus meeting last night. And he has an apparent ally in Rep. Brad Sherman (D-CA), who’s introduced a plan to his colleagues to eliminate the payroll tax holiday and replace it with a one-time check — to refund to workers an equivalent percentage of the Social Security tax they payed in 2010.

But Democrats will have a hard time making any changes to the tax plan — including simple ones like Sherman’s. And if his effort is unsuccessful, he and Holt will have to cross their fingers and hope for the best. Or, in a worst case scenario, say “I told you so” to Democratic leaders.