Friday Mar 05

Winter 2020

A Bad Loser’s Winning Gambit

By Drummond Pike

Despite progressives’ distaste for the outgoing president’s approach to politics, and his nihilistic distain for tradition, he is winding down his impeached, single term presidency with a whirlwind of surprisingly effective scorched earth politics, mostly achieved by executive fiat. Opening the Alaska National Wildlife Refuge (ANWR) to the petroleum industry’s wet dream of “drill, baby, drill”; denuding our European allies of aerial surveillance of a clearly aggressive Putinesque Russia; giving the greenlight to Israel’s assassination of Iran’s leading nuclear scientist, and thus hamstringing any Biden effort to resuscitate the Iran Nuclear deal; jamming through the Barrett nomination to the Supreme Court, thus cementing the most rightwing majority since the 30’s; replacing the lead scientist for NOAA’s climate assessment with a “climate skeptic”; trying to eliminate from Census totals any non-citizens, thus skewing new Congressional maps; driving EPA regulation in every way possible to benefit the polluters; and any number of other schemes to benefit corporate avarice at the expense of working people.

Noting this “12 Days of Christmas” for corporate interests, it is quite fascinating to find, in one or another of the myriad polls detailing voter motivations, that rural, conservative voters were strongly motivated by concerns about big corporations and corruption. Trump, in their view, was on their side which either shows the success of Kellyanne’s “alternative facts” strategy abetted by Fox News, or an abject failure of the press generally to report on the essentially corrupt practices of this outgoing band of thieves. It really does give a progressive pause.

This column will be published shortly after the Georgia senate runoffs are tallied, making it hard to evaluate the future for what was one of Trump’s more astute moves – albeit inadvertent I suspect – a temporarily halt collection of payroll taxes. On its face, it was the opening salvo in yet another assault on Social Security, a conservative object of scorn for 85 long years. To their detriment, Democrats basically ignored this as a campaign issue that could have altered at least some of the Senate races that turned out so poorly for them. Trump used the executive branch’s power to set tax withholding deadlines to grant a “payment holiday” (not a “tax holiday,” an important distinction) for FICA taxes. Citing the pandemic-caused economic recession as a near-term reason to put more in people’s paychecks, he then promised to make this purported tax cut permanent, if re-elected – something he couldn’t do without Congress.

 If FICA was abolished, this primary funding mechanism for Social Security would have been eliminated as conservatives have dreamed of since 1935. His delusional belief was that he was headed toward a landslide election for a second term with long coattails resulting in a return to one-party government controlling all three branches. In that setting, the conservative holy grail of “privatizing” Social Security would have been within reach – a goal very nearly achieved in 2005 when Bush II pushed as hard as he could. It ended then in abject defeat and resulted in Pelosi’s first run as Speaker after the midterms a year later, so why Dems passed on the issue this time around is a mystery. Trump’s move was insidious – starving the beast – but its failure now saddles the left with its first big governing challenge come January. Most large employers did not take up the offer to defer withholding for FICA, but some did. However, and far more importantly, the federal workforce was required to stop withholding, thus deferring taxes to January. So now, with Trump losing, the can is kicked down the road leaving the incoming Biden administration with two bad alternatives.

The Federal Insurance Contributions Act (FICA), more commonly referred to as the “payroll tax,” is the flat tax applying to all wages up to a cap[i] of $137,700 that funds Social Security (or, as it was formally called since its 1935 inception: Old Age and Survivors Insurance). At the time, and virtually ever since, it is derided on the right as “socialism” and celebrated on the left as an expression of concern for vulnerable, older Americans. There have been many subsequent fights over Social Security, as it has been amended and refined over the years, pitting defenders of the “common good” against libertarian-inspired “rugged individualists” who have no use for “guv’ment handouts.”

 A good part of the political financial fuel for privatization comes from Wall Street which literally salivates at the thought of “managing” people’s Social Security accounts. Already, the outgoing administration managed to undo an Obama administration fiduciary rule requiring money managers to put their retirement clients’ best interests first before consideration of their own compensation, and returned to a 70’s regime called the “five-part test.” In an early success for Federalist Society strategists, the new Trump administration declined to defend DOL’s rule, and then prevented California and other states from intervening in its defense, thus permitting an acknowledged conflict of interest to return to favor. In this regime, for instance, a professional is permitted to sell a higher commission IRA investment rather than a less expensive alternative to clients without consequence. Thieves in the night, as they say.

 One can imagine that with the rightward drift of the Supreme Court, there will be continuing assaults on government “safety net” programs, the first chapter of which will unfold very quickly once the future control of the Senate is known. If “grim reaper” McConnell remains at the helm, most tax reform or efforts to deal with DOL’s fiduciary rules will die on the vine. But those fights, should they come to pass, will follow a far more pressing matter: what to do with the millions of federal and other workers whose FICA taxes were not withheld, and which will be due and payable in January, either through a lumpsum or a higher withholding rate going forward.

The political genius behind Trump’s “holiday” from FICA, effectively implemented for some but not all, now results in the odorous dilemma of choosing who to inflict pain upon. If non-payers were simply let off the hook, then the payers since August will have been injured; otherwise, the non-payers will be taxed more heavily than payers, going forward until they’ve made up the lost ground. There will be a lot of unhappy workers, either way. Nothing like a divide and conquer move, eh? 

Core Republican ethos remains to divide young people away from seniors by eroding trust in Social Security (“It’s going broke in xx years!!”). One can imagine future Trumpian aspirants for the presidency vying for attention with various schemes to rid our system of socialism or pretty much any other manner of collective approaches to a social safety net. And with the now fundamentalist Supreme Court having marginalized Chief Justice John Roberts, new legal challenges to taxation seem ripe for the making. Rightist legal dogma wants to reinterpret “We the People” based “sovereignty” to extend solely to individuals rather than remaining a statement of collective interest. “If I don’t want to pay union dues, you can’t make me” is one version that has already been largely successful, thanks to McConnell’s machinations over the past 12 years to turn the courts into activist interventionists, repeatedly overturning both federal rule-making and legislation. What’s bearing down on us in the “Barrett Court” is anyone’s guess, but I’m pretty sure it’s not going to be good for either workers or for those that seek to govern for the common good, even with majority support.

 

In the meantime, keep tabs on what happens with the FICA “holiday.” It will tell us a lot about what the next two years may have in store.

 

A last comment: much has been talked about regarding white working-class people turning to Republicans and away from their long-time Democratic allies. Unions have waned into political lightweights in most regions, while Clintonian “globalists” aid multinationals and the financialization of large swaths of the economy. It isn’t rocket science to sort out that Dems haven’t done much more than lip service to the needs of working people. Until that changes, progressives are fighting an uphill battle with diminishing ranks. Whether it’s raising the FICA cap, taxing the super wealthy, re-invigorating the right to organize for collective bargaining, or making education both better and affordable, we have to achieve something significant for rural and working people. Otherwise, we might as well become used to being a party out of power, even when we win.

 

[i] Regarding the FICA cap, see my Social Policy column “Raise the Damn FICA Cap” Winter, 2018

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