The '$40 Per Paycheck' and Other Payroll Tax Cut Fibs

In mid-February, during the run-up to the extension of the two percentage-point cut in the Social Security payroll tax to year's end, the White House, using garbled language sadly not unusual for this bunch, claimed that:

Currently, 160 million Americans benefit for the tax relief that's set to expire at the end of the month. The typical family saves about $40 with every paycheck.

Neither statement, even after grammatical correction, is anywhere close to being true. We can add both to the pile of falsehoods which will be as thick as a major metro area phone book by the time they're all done.

A commenter at another site gave Team Obama's penchant for quickly disseminating and perpetuating persistent fibs while fiercely resisting attempts at correction an interesting term to remember and employ: "viral lying." The administration's mendacity on the Social Security tax cut certainly exemplifies it. Meanwhile, establishment press lapdogs, who routinely invented alleged "lies" which weren't lies at all during George W. Bush's eight years, have allowed both howlers above to slide with little if any objection, missed glaring inconsistencies in messaging, and have occasionally been duped themselves.

Let's start with the "160 million Americans" claim. There are at least two problems with it:

  1. According to the 2011 annual report of Social Security's Trustees, "an estimated 157 million people had earnings covered by Social Security and paid payroll taxes" in 2010. Augmented by the economy's tiny 2011 improvement, that number probably was about 160 million last year. But this does not mean that 160 million Americans are "currently" working. As of January's employment report, using the more inclusive Household Survey, total employment, including self-employment, was only 141.6 million.
  2. Additionally, not all workers are forced to participate in the Social Security train wreck. At the Coalition to Preserve Retirement Security, which should really call itself the  "Don't Force Us to Join Everyone Else's Bankrupt System Coalition," the organization's mission statement tells us that "6.6 million public employees are covered by state or local plans in lieu of Social Security." Other exempt persons "currently" working would include certain students, federal employees hired before 1984, and members of a few religious groups.

Thus, the administration has overstated the number of American workers who will "currently" benefit from the tax cut by roughly 20%.

Obama's "$40 per paycheck" for "the typical family" assertion is a far worse fairy tale.

The statement is only true in very narrow circumstances, namely single-earner households where the person employed makes $52,000 per year in taxable Social Security wages and is paid every two weeks. The trouble is, according to a 2009 human resource consultant's presentation, most employees (though I believe it's a bare majority) are paid weekly (note the spelling; almost everyone thinks they're paid "weakly," but I digress). Workers paid every seven days who are unfortunate enough to actually buy the administration's "$40 per paycheck" fib, in conjunction with White House statements that "the typical family" earns about $50,000 a year, are being misled into believing that the tax cut is far bigger than it really is. A worker paid weekly will only see an extra $40 in each paycheck if he or she makes a far from weak $104,000 per year, which is hardly "typical." A two-income couple making a combined $50,000 per year where both are paid weekly might actually believe that the tax cut will give them a total of $80 every week in their two paychecks. Don't spend it, folks, because you're not going to see it.