Moynihan and the Conservatives
Jr.", "Robert W. Kasten
THE PUBLIC POLICY MOYNIHAN AND THE CONSERVATIVES Sen. Daniel P. Moynihan (D-NY) has unwittingly proposed one of the most pro-family legislative initiatives in recent years—a cut in the Social...
...The fact that most politicians from both parties are wary of even supporting a payroll tax cut is a testament to Social Security's public support...
...Alternatively, the Gramm-Rudman deficit targets could be adjusted to reflect the lower level of tax revenue...
...American families have less and less take-home pay at a time when the costs of child-raising—child-care, health, housing, and college education—have outpaced inflation...
...Not everyone would experience higher rates of return on private retirement accounts than they would under Social Security...
...THE AMERICAN SPECTATOR AUGUST 1990 27 Moreover, a payroll tax cut would actually strengthen the Social Security system...
...The next logical step in pro-family tax reform is to cut the payroll tax...
...Privatizing Social Security would eliminate an important subsidy for motherhood...
...Last May, the Democratic National Committee and the centrist Democratic Leadership Council endorsed the Moynihan plan...
...electric bill, and little Johnny's baby-sitter...
...Unless conservatives unite to cut payroll taxes today, the $3.2 trillion tax increase—that's how much the excess payroll tax will take from workers over the next three decades—will result in lower productivity, fewer jobs, and economic stagnation...
...By using some of the savings to eliminate the Social Security earnings limit and the onerous taxation of Social Security benefits, we can give the elderly more freedom to work, save, and invest...
...Free marketeers see the Moynihan opening as a rare chance for fundamental reform of Social Security...
...We have to bring the tax burden down and leave families with more of their own income to invest in America's children...
...This would lead to a multibillion dollar tax increase that would reduce economic growth and throw millions of people out of work...
...Privatization would strip away the Social Security spousal retirement benefit, thus eliminating one of the few federal subsidies for traditional families...
...Therefore, workers in traditional families receive a greater rate of return on their payroll tax contributions...
...This high tax burden has changed family life in America—for the worse...
...First of all, the American people strongly support Social Security...
...Cutting the Social Security tax is a good first step, which would save young families up to $600 per worker per year...
...Today, 74 percent of taxpayers pay more in combined payroll taxes than they do in income taxes...
...We should encourage people to deposit their payroll tax cut savings into tax-deferred vehicles like President Bush's Family Savings Plan...
...I have recently been joined by the Heritage Foundation and Citizens for a Sound Economy in the crusade for a payroll tax cut...
...Perhaps more importantly, the Social Security surplus was small, and few people fully comprehended its role in subsidizing the rest of the federal budget...
...If we simply spend the same amount of money next year that we spent this year, we would more than offset the $40 billion revenue loss from this tax cut...
...economy, and we proposed legislation to cut the payroll tax...
...Libertarians might argue that the federal government has no role to play in the way people organize their lives...
...Furthermore, proposals to replace Social Security with a private sectorretirement system face practical problems...
...In the future, artificially high taxes will make the low-growth prophecies a reality...
...Whether or not that's true, I believe we should take advantage of every opportunity to cut taxes...
...If the President agrees to a tax increase as part of a budget deal with Congress, then the new revenue should be used to finance a payroll tax cut...
...We should improve on the Moynihan proposal by leaving a larger reserve in the fund...
...Furthermore, payroll tax cuts have the political support of a broad-based coalition of senior citizens, small business, and labor groups...
...And many young couples just cannot afford to have children...
...But the 1981 and 1986 Reagan tax reforms addressed these problems...
...28 THE AMERICAN SPECTATOR AUGUST 1990...
...What could be more foolish than to keep boosting an already heavy tax burden, thus discouraging families from bringing up these bright and productive future workers...
...That's why conservatives support pro-family tax breaks and programs that help keep two-parent families intact...
...W hat about the budget deficit...
...But I think most conservatives would agree that the traditional family is the basic building block of a prosperous and morally strong America...
...And now more than ever, the American family needs a tax cut: From 1955 to 1988, the federal tax burden on middle-income families rose twice as fast as their income In 1955, a median-income family of four paid federal taxes at an average rate of 9 percent a year...
...In fact, the combination of pro-growth tax cuts, private savings incentives, and increased immigration could reduce the expected need to raise payroll taxes to fund the baby boom's retirement three decades from now...
...And as long as President Bush sticks to his "no new taxes" pledge, the Gramm-Rudman budget-cutting process can take care of the rest...
...Social Security provides additional benefits equal to 50 percent of the principal wage-earner's benefits for mothers who have decided to work at home to raise their children...
...While Democrats in Washington have kept the Moynihan plan at arm's length, those on the grassroots level have responded with a rising wave of enthusiasm...
...We have a huge Social Security surplus today because we based the 1983 reforms on projections of slow economic growth for the rest of the decade...
...So why haven't conservatives grabbed this ball and run with it...
...Skeptics claim that Senator Moyni- han's real motive is to force President Bush to break his "no new taxes" pledge...
...We should not try to project economic policy that far into the future, setting in stone tax increases that are unnecessary...
...ne proposed conservative response to the Moynihan plan—privatization of Social Security—is highly inappropriate...
...tax rates were reduced and the personal exemption was doubled...
...To be sure, rising income taxes and the erosion of the personal exemption have contributed to this rising family tax burden...
...But from an economic standpoint, a payroll tax cut is clearly superior: it reduces a burdensome excise tax on both labor and capital, and it increases work incentives...
...Fearful of a backlash from senior citizens, most conservative politicians—including my friends Newt Gingrich and Vin Weber—support the status quo...
...Daniel P. Moynihan (D-NY) has unwittingly proposed one of the most pro-family legislative initiatives in recent years—a cut in the Social Security tax...
...From a political standpoint, conservatives are in danger of surrendering the field of pro-family, pro-growth economics to the liberal Democrats...
...Many mothers are now forced to enter the work force because one paycheck can't cover the combined costs of the monthly mortgage, the by Robert W. Kasten, Jr...
...A GOP plan to cut taxes didn't break any new political ground...
...Payroll tax cuts would spark economic growth...
...The measure would reverse the accumulated federal tax bias against families, leaving them with more of their own income to invest in their children...
...Ironically, the Moynihan plan stems from a conservative Republican initiative...
...The chief culprit has been the payroll tax, which has risen 400 percent since 1955...
...Rvo years ago, Jack Kemp and I saw the threat that the looming Social Security tax surplus was posing to the Robert W. Kasten, Jr is the Republican senator from Wisconsin...
...But that doesn't mean we should not encourage private savings to supplement Social Security...
...I can appreciate some of the economic arguments for a private-sector retirement system...
...We can't let that happen—so let's seize this opportunity to return some freedom and autonomy to America's families...
...The Social Security system works, and should remain the bedrock of America's retirement system...
...Some pro-family advocates argue that instead of cutting payroll taxes, we should double the personal exemption again...
...Most conservatives, however, are divided over how to respond to Moynihan's initiative...
...Economist John Mueller points out that the last generation opting out of Social Security would have to pay for retirement twice—once for its parents under the current system, and once for itself under the new private system...
...Over time, these programs develop entrenched bureaucracies and special-interest constituencies who work to expand them further, requiring even higher taxes on families...
...Congress has responded by creating more federal programs for middle-income families, like Head Start and the Act for Better Child Care...
...To be sure, this measure would help the family...
...Conservative activist Jeff Bell put it succinctly: "A lower payroll tax makes it easier to afford children, which is a different kind of real wealth...
...In 1970, it paid 16 percent and, by 1988, 24 percent...
...But I am convinced that privatization would undermine the traditional family...
...Parents must spend more time working to pay the tax bills, and less time raising their children...
...We are often reminded about Social Security's declining ratio of workers to beneficiaries and how the ultimate health of the Social Security system itself depends on the productivity of tomorrow's workers...
Vol. 23 • August 1990 • No. 8
