Reuters Money

Would Obama’s payroll tax cut hurt Social Security?

The Congressional Super Committee hasn’t even started cutting Social Security, but advocates are already expressing concern on a different front: the payroll tax cut extension proposed last night by President Obama as part of his jobs plan. Those payroll taxes fund the Social Security program.

The President asked for a $175 billion one-year extension and expansion of the employee payroll tax holiday now in place, halving the tax rate to 3.1 percent in 2012. He also proposed halving employer payroll taxes to 3.1 percent for the first $5 million of payrolls in 2012. The president also wants a complete payroll tax holiday that would apply when companies grew their payrolls by up to $50 million in a year by hiring  new workers or raising the salaries of existing workers.

These cuts in the Federal Insurance Contributions Act tax (FICA) may be one of the best available stimulus options in the current political climate, and they will have a positive economic impact. An analysis by The Center for Budget and Policy Priorities notes that the cuts already in place make a substantial difference in the spending power of middle class families, and that allowing them to expire at this time would be very negative for growth:

Failure by Congress to extend the temporary payroll tax cut enacted last December would reduce all paychecks starting on January 1, withdrawing needed support from the still-weak economy. The measure, part of the tax cut-unemployment insurance deal between President Obama and Republican leaders, reduces the employee share of the Social Security payroll tax, boosting workers’ take-home pay by an estimated $120 billion in 2011. The tax cut is worth $934 to the average worker.

And Moody’s Analytics estimates that allowing the payroll tax cuts to expire would reduce GDP growth by one percentage point in 2012, translating into one million fewer jobs by the end of next year.

But Social Security advocates worry that these temporary payroll tax cuts will never be restored. “The problem is, it is very easy in our current political climate to cut revenue and very hard to increase it,” says Nancy Altman, co-director of the Strengthen Social Security coalition and author of The Battle for Social Security, an excellent history of the program and its politics.

“Look at the controversy over ending the Bush tax cuts, which would only affect a small portion of taxpayers,” Altman says. “In this case, if you propose restoring the payroll tax down the road, you’d have to double the rates on workers making minimum wage. This is being sold as temporary, but it’s not likely to work out that way.”

Where is the real U.S. jobs plan?

Jobs, justice and peace. Have three themes ever been so intimately intertwined since Dr. Martin Luther King, Jr., championed this tri-partite campaign in his 1967 March on Washington?

Unemployment is ravaging the country, especially among urban minorities. Yet Congress has yet to put forward a comprehensive jobs plan to create employment. We’re still fighting two wars and garrisoning troops in Europe and Japan as the jobless rate soars at home. Debt reduction is still a priority over job creation.

The current economic downturn has put the brakes on economic progress for most of the American working class. They shared in widespread growth during the 1990s, but have been falling behind during the latest recession.

The pain has been uneven and most punishing in the inner city and among the young. For white men and women, the jobless rate for those 20 years and older was around 8 percent as of July. For white teenagers (age 16 to 19), the rate was 23 percent.

Unemployment for African-American adults is twice as high as white adults at 16 percent. For African-American teenagers, the rate soars to nearly 40 percent.

Much of the reason that decent-paying jobs have evaporated is that inner cities and suburbs have been de-populated and businesses have left — many of them to wealthy suburbs or overseas. Unionized industrial jobs have also fled.

There’s been great progress made since the end of World War II to create a broad base of high-paying jobs, although the bulk of those positions were in unionized manufacturing companies, nearly all of which have cut back, shut down or outsourced. High-wage jobs left urban manufacturing districts to be replaced by low-wage service jobs or occupational deserts.

Economy revival? Bond barons say spending is the answer

When bond gurus speak, they don’t mince words.

The message from two influential bond traders is unambiguous: Instead of cutting government spending now, Congress should be spending to create jobs.

Employed people pay taxes, contribute to communities and buy homes, vehicles and appliances. This kind of stimulus is undeniable. Job creation is the ballgame now. Interest rates really can’t go any lower. The Fed did all it can do.

I know this runs counter to what you’re hearing from the Beltway and Tea Party circles, but the logic is simple: Without tackling long-term structural unemployment, there will be no broad economic revival. The middle-class could dip further into despair, feeding a millennial malaise that morphs into a depression.

Nearly lost in a week of relentless deficit yammering and President Obama’s Afghanistan withdrawal plan was a compelling commentary by Bill Gross, the leading bond fund manager by assets.

Starting out as a rant on why a college education isn’t worth the price — a view reflected in this column a few weeks ago — Gross eventually gets to the point. Cutting government spending alone will not create jobs.

“But fiscal balance alone will not likely produce 20 million jobs over the next decade,” Gross writes, “government must take a leading role in job creation.”

50+ job seeker? Tweet your way to a new career

Most older job hunters are comfortable with basic business technology— computers, the Web, email and smart phones. But we still have some Luddites out there – you know who you are – trying to squeak by, hoping to finish their working years without getting fluent in technology.

That’s especially true of social media tools like LinkedIn and Twitter, which can play a big role in helping job hunters find new work in a hard-times economy.

“The first time I looked at Twitter, I thought ‘what is this thing?’,” says Lee Silverstein, who is transitioning to a new career at age 50, following 29 years in management jobs with major department stores — most recently Macy’s, where he focused on training and leadership development.

Silverstein didn’t think of himself as a writer with something to say online, but he jumped in anyway with a blog and Twitter account.

“When I started the blog, I saw that I did have something to say, and I started sharing my thoughts,” he says. In a short time, Silverstein has built an audience of 600 followers for his tweets and blog posts on leadership development and mentoring. “It’s about making yourself findable,” he says. “Just sitting and going through the job boards won’t get you where you want to be. You’ve got to give people a reason to discover you.”

In a tough job market, it’s hard to overstate the importance of networking, differentiating yourself and highlighting the value you can bring to an employer. Social media platforms offer some important means to those ends through sharing expertise and making new connections. But older job hunters can be at a competitive disadvantage.

“I dont think it’s a factor of age alone – it’s a comfort level using the tools,” says Miriam Salpeter, a job search and social media coach, and author of Social Networking for Career Success: Using Online Tools to Create a Personal Brand. “People who don’t enjoy social media don’t want to feel they will be sucked in, and tied down by it all the time. And with Twitter, some just don’t think they can communicate a full thought in 140 characters. I find that it helps to have targets and goals to use these things well.”