Thursday, September 15, 2011
It’s the most exciting time of the year! The new television season kicks off next week. As a kid I would collect each year’s TV Guide Fall Preview Issue. As an adult the DVR is programmed and I’ll sample most of the new shows and get caught up with old favorites. Today’s media environment allows for year-round programming, so some of the anticipation is reduced since viewers haven’t been abandoned for months as in decades past.
One of this year’s most promoted shows is a fresh take on the 1970’s runway hit “Charlie’s Angels.” The current version promises more action and complex crime fighting than the original. It may prove to be the perfect escapist quasi-procedural that satisfies the masses. More than likely it’ll wind up like last year’s resurrection: “Hawaii 5-0.” “5-0” is eminently watchable, highly produced and totally tedious because it was built on the concept of a show rather than the characters and storylines. It may be new, but it feels old and tiresome. This new season will have plenty of originals shows that we’ve seen before too.
It applies to politics as well. President Obama is doing his own version of an original repeat. His speech to a joint-session of Congress last week laid out his American Jobs Act. With 25 million Americans out of work, millions of others barely holding on to their jobs, it is the number one issue facing the electorate. It has been for three years, it’s just now getting the kind of attention it deserved.
The cornerstone of the proposed Act is changes to the payroll tax. There are lots of different taxes that individuals and their employers pay, so it’s important to be clear about which tax is going to be cut. Each employee has 6.2% of their paycheck withheld for “FICA” (Federal Insurance Contributions Act) which is government-speak for Social Security. The company you work for also pays the same 6.2% as a match. Social Security is supposed to then hold onto those dollars and allocate them back to the employee in benefit payments upon their retirement. Last month on the anniversary of the signing of the Act I examined how Social Security is not a spending plan but instead is a trust fund and that has been used like a piggy bank.
In December 2010 as part of President Obama’s deal with Republicans that extended some higher end tax cuts (known as the “Bush Tax Cuts”) a reduction to FICA of 2% was put into effect for 2011. Instead of having 6.2% withheld, it’s just been 4.2%. The idea is that if every American was receiving more cash in their paycheck, then they’ll spend it. And with more spending, then more products would need to be made, and thus more jobs created. The annual growth rate, consumer spending and the unemployment rate have not materially changed in since these policies were put into place. The $25 per week increase that average workers have seen hasn’t much changed spending habits.
For 2012 President Obama wants to extend the reduction for another year – providing each working American the $25 per week that they’ve grown accustomed to. In addition the American Jobs Act proposes cutting the 6.2% that employers pay into the fund on behalf of employees to 3.1% for the first $5 million payroll dollars. Any new worker hired for a new position would be exempt from employer portion of FICA up to $50 million. This incentive is geared towards encouraging employers to create new jobs.
The proposals reflect a fundamental misunderstanding of why employers hire. Employers hire new employees because their business requires it. A restaurant hires more cooks, wait staff and cleaners when more customers justify it. They don’t hire to save on payroll taxes.
More problematic, however, is that the Democrats and Republicans appear to be ready to compromise on some version of these payroll tax cuts. These taxes supply the cash to the Social Security Trust Fund that has been raided to help offset government spending. Further depriving the Trust Fund of dollars without any adjustment to the benefit structure puts the program at risk faster than its needs to be. It’s a classic example of short-sightedness. In this case it’s partial blindness.
Presidential aspirant Rick Perry referred to Social Security as a “Ponzi Scheme” that won’t be around. Philosophically whether the Government should be providing its citizens with retirement funds is a debate worthy issue, but the reality is that Social Security will be around forever and fighting the fight from the 1930’s isn’t a way towards resolution of finding jobs today. It’s time to shore up the program. That doesn’t happen by taking away its cash flow! Working Americans – would you prefer $25 per week today and have your retirement age increase by years … or do you want to keep the rate what it has been for 30 years and keep the benefits as stable as possible?
I applaud the President for trying to do something. After 32 months I’m rather anxious to get to work myself. Maybe it’s time to re-do the resume to highlight that I’m a tax benefit to potential employers? That’d be a great bit for a tv show.