The nation’s economy is in trouble, but President Donald Trump’s recent executive order to suspend Social Security and Medicare payroll taxes doesn’t get relief to the right places and could create more long-term problems than it solves in the short-term.
Last week, Trump signed an executive memorandum that extended supplement unemployment relief but reduced it from $600 a week to $400. He also suspended Social Security and Medicare taxes for the last four months of the year for people who earn less than $4,000 every two weeks ($104,000 per year). On Sunday, Trump said he wants to make the tax cut permanent if he is re-elected.
Kiplinger reported that, based on current Social Security and Medicare payroll tax rates, that would mean an additional $31 in weekly take-home income for a 40-hour-a-week worker earning $10 an hour. For someone earning $104,000 a year, it would be about $150 a week. Cutting payroll taxes of low earners probably will spur the economy because a lot of that money will get spent. Cutting taxes more for the wealthy mainly makes them wealthier.
Remember, the people in most desperate need, the unemployed, are getting their benefits cut by a third. Retirees and stay-at-home parents get no relief, according to The Washington Post.
The move caused immediate concern for the future of Social Security and Medicare. Because of long-term demographic issues, the trust fund is already due to be depleted by 2035.
Over the weekend, Treasury Secretary Steven Mnuchin said during the payroll tax holiday, the trust funds would get money from the federal government’s general fund, according to The Washington Post. But the general fund isn’t a magic money tree; taxpayers will have to foot the bill sometime.
If the Trump orders sound like election-eve generosity to voting blocs, they are. If they sound like a dangerous extension of executive power into issues that ought to be decided with the consent of Congress, they are that, too.
They’re unfunded, unsustainable, undemocratic and ill-designed to deal with the biggest economic problems at hand. Trump should have worked out a better plan with congressional leadership, but instead he acted by executive order.
As we said in the Barack Obama administration, executive fiat is the wrong way to rule.
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