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It’s no secret that I’m a harsh critic of the Social Security program, including the very way in which it was constructed back in the 1930s.
More importantly, I’m an even harsher critic of the way our lawmakers have systematically mismanaged decisions related to the program – especially in recent years.
But I have to tell you: Even I am continually shocked by how much worse government officials can make things, and how much farther down the road they’re willing to kick the can.
In case you can’t guess, I’m talking about the fact that Congress has now passed the “Middle Class Tax Relief and Job Creation Act of 2012.”
Oh, sure, it sounds magnanimous enough – grandiose even!
But if you take a look under the hood, you’ll quickly realize that this legislation has very little to do with either middle class tax savings OR job creation.
What it should really be called is the “We Hope U.S. Voters Are Too Uninformed to Recognize That We Simply Stole More Money from Their Failing Retirement Program to Buy Votes” act. (I wouldn’t be opposed to keeping “of 2012″ in the name if someone insisted.)
I realize that’s a pretty big charge. So let me explain …
Last year, lawmakers decided to cut the amount of money each worker contributes to Social Security by two percentage points.
Then, they extended it for the first two months of 2012.
And with this latest act they’ve extended it all the way through this year.
Now please remember that even before any of these payroll tax cuts, Social Security had already begun taking in less than it was paying out … AND that the program’s Trustees continually underestimated the timing and magnitude of this obvious problem.
Also please remember that when the initial payroll tax cut was initiated in 2011, Washington told us it would be for one year and one year only.
Did I believe that? No. I said as much right here in Money & Markets when the first payroll tax cut was announced!
So the fact that they keep extending this “one-time” cut is bad enough.
But Here’s the REAL Problem with This Latest Payroll Tax Cut …
Sure, the primary part of this legislation – the continued two-percentage-point reduction in the amount that all workers contribute to Social Security – WILL put more money in all our pockets this year. So in that respect it IS a 2012 tax cut – one I’m certainly grateful for.
But it also extends unemployment benefits and shores up certain Medicare reimbursements to doctors, neither of which creates jobs nor saves us any taxes as far as I can figure.
And the elephant in the room is this:
Despite all the early bluster about making sure these items were paid for through other offsets and cuts … our esteemed lawmakers ultimately decided that, uh, that was just a bit too hard to figure out by the end of February!
I mean, who wants to make important decisions like that in an election year anyway, right?
The end result is just another example of robbing money from the Social Security system to get us through today with absolutely zero thought on how it impacts tomorrow.
During negotiations over this legislation, Democratic Senator Max Baucus of Montana called the package “very good for the country” … while Republican Representative Steve Latourette from Ohio was quoted as saying this compromise is “the art of a deal.”
Me? I call the whole thing the art of a raw deal.
And let me be clear – this decision runs deeper than even Social Security.
Reason: It may put us right back into another debt ceiling showdown far sooner than most Americans think possible.
So what can we do about it?
Well, for starters, some of my colleagues and I have been working on a project to get Congress to stop their fiscal insanity. It’s called “The Campaign for a Sound Dollar” and you can learn more about it here.
Second, when it comes to the actual state of our nation’s retirement system, we all need to be as realistic as possible. Yes, near-term payments will keep going out … but the farther down the line you look, the less certain anything related to Social Security becomes.
Therefore, it’s absolutely critical that you continue to build your own private nest egg … with a major emphasis on investments that will both increase in value and provide you with solid cash flows in retirement. To learn more about some of my favorites right now, I encourage you to watch my video presentation located here.
Best wishes,
Nilus Mattive
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