I’ve got a new TIME.com piece on the sudden, recession-caused disappearance of the subsidy the Social Security system has been providing to the rest of the federal government for the past quarter century. This had been projected to happen in 2017, but it turns out we didn’t have to wait. The man you all know as plukasiak tipped me off to the story a few weeks ago; I credit him in my article.
In the past I’ve written worriedly about the fiscal ramifications of Social Security’s switch from cash cow to (eventual) cash hog. But now it suddenly doesn’t seem like all that big a deal:
My earlier worry about 2017 was that the country was going to have to find a way — through raising taxes or cutting spending — to make up for the $100 billion or so that Social Security had been handing over to the rest of the federal government annually. Now, with a budget deficit projected at $1.8 trillion this year, we’ve got far bigger fiscal issues to worry about.
One really interesting consequence of this shift that I didn’t get into in the article is distributional. For the past 25 years, payroll taxes have been used to partly fill a fiscal gap left by reductions in income taxes. The payroll tax is a working-class tax; income tax receipts skew toward the top of the income distribution. So, to express it in as crudely populist terms as possible, we’ve been increasing taxes on the poor to give tax breaks to the rich. It looks like that’s about to come to an end.