Social Security: for richer or for poorer By SHERRY HALBROOK Our political leaders in Washington are fighting over whether to extend a reduction in income taxes and the federal payroll tax that supports Social Security. To understand this battle and many others relating to Social Security, it may help to review some fundamentals of how it affects your life and the national economy. When you are working, the payroll tax (FICA) is deducted from your pay. When you retire or become too disabled to work, you receive monthly Social Security benefits. The size of the pay deductions and your benefits are both tied to how much you earn and for how long. Unlike welfare, Social Security is called an “entitlement” program because you and your employer paid for (earned) your benefits and you are entitled to receive them. Politicians fight over every aspect of the program: who should pay in, how much and for how long; and who should receive benefits, at what age and how much. They also fight over how the money in the Social Security Fund should be invested and by whom. Social Security was started in 1935 after the Great Depression to give Americans some financial security when they became too old or disabled to continue working. The depression and massive unemployment were triggered by a sudden, catastrophic stock market crash and bank failures caused by widespread stock speculation and debt in the 1920s. The funds from the payroll tax may only be invested in U.S. Treasury notes (bonds), the safest security known. Social Security may only redeem those notes to pay for benefits and its operating costs. That means you, the workers, are the biggest lenders to the federal government. And the country depends heavily on you to keep working and financing its debt. Now, with the economy weak, unemployment high, baby boomers retiring in record numbers and income tax revenues low, the federal government needs to borrow more from Social Security, which has less payroll tax revenues to lend. In 2010, to help stimulate the economy and relieve some immediate economic pressure on workers, the payroll tax rate for 2011 was reduced from 6.2 percent to 4.2 percent. That 2 percent decrease was extended through February 29, 2012. That was more money for you to spend, but less money (about $120 billion in 2011) coming into Social Security to pay for benefits and to buy treasury notes. The battle is on again over whether to extend the payroll tax cut and income tax cuts and for how long. The longer the lower payroll tax rate is in place, the sooner the Social Security Fund could run dry, but failure to stimulate the economy and reduce unemployment is dangerous too.

The Communicator Letters policy We welcome letters to the editor about union issues and events relevant to PEF's diverse membership. All letters are subject to editing for space, fairness and good taste. Please keep them brief (up to one page, double-spaced or a maximum of 250 words), and please include your name and phone number for verification. Send letters to thecommunicator@pef.org: The Communicator Public Employees Federation P.O. Box 12414 Albany, N.Y. 12212-2414 Email to Sherry Halbrook, Editor or Darcy Wells, Editor-In Chief