An expert on Social Security says the entitlement's finances
will only get worse if lawmakers follow the CBO's recommendations
on improving the economy.
This month, the Congressional Budget Office (CBO) reported that America's gross domestic product
would grow by 2.2 percent if the Bush-era tax rates were extended.
If President Obama's Social Security payroll tax cut and jobless
benefits for the long-term unemployed are extended, it is projected
to expand by nearly three percent.
Author Michael Tanner, also a senior fellow at the
points out that Social Security ran about a $100 billion deficit
this year, due in part to the payroll tax cut. Further, Social
Security is $22 trillion in the red going forward.
"If that payroll tax cut is extended, Social Security's finances
will only grow worse," Tanner warns. "The problem is that if you
have a dedicated revenue source that's already inadequate to pay
benefits, and you further reduce that revenue, you're only making
Social Security's problems more immediate."
So why does the Congressional Budget Office not take this into
"The Congressional Budget Office remains wedded to a Keynesian
model that essentially says that the more money the government puts
in the hands of consumers, the more economic growth you get," the
author explains. "But it doesn't sort of deal with the other side
of that equation of how you're going to get more investment in the
economy, which means tax cuts for businesses that hire workers and
invest in them."
Tanner adds that it does not answer the question of whether
money will be taken out of the pockets of those businesses through
more borrowing and higher debt -- not to mention higher taxes on
the businesses in order to pay for the tax cut to consumers.
Regardless, he asserts there is very little evidence that the
payroll tax cut did what Vice President Joe Biden once claimed it would
do in the first place: stimulate the economy.
"Most economists would agree that one-time or short-term tax
cuts don't have much stimulus, that people generally save that
extra money or pay off existing bills," the Cato Institute senior
fellow offers. "They don't buy new products; and businesses, of
course, can't plan into the future. One-time tax cuts don't do much
good for businesses, which need stability in the tax code in order
to plan long-term investment."
Meanwhile, the same CBO report asserts that doing nothing to
stop the country from going off the fiscal cliff would send the
economy back into recession and cause the jobless rate to spike at
9.1 percent by next fall.