On That Social Security Tax Cut

During my recent town meetings, one subject which kept coming up was the cut in Social Security (FICA) taxes that many people have spotted in their paychecks. Everybody's happy to have a little more money, but people wanted to know how we could cut Social Security taxes when Social Security is in economic trouble.

Here are the facts:

Congress approved legislation last December to keep the 2001 and 2003 tax cuts from expiring. Included in that package was a provision which cut employees' Social Security taxes for one year by about 34 percent. Normally, most employees pay 6.2 percent of their wages to finance Social Security, but through 2011 the rate will be 4.2.

The Social Security Trust Fund will continue to get the full amount as the U.S. Treasury is making up the difference. Further, employers continue to pay their full share, 6.2 percent of each employee's wages.

Where will the extra money from the Treasury come from? We will borrow it - largely from the Chinese. President Obama insisted on including the temporary Social Security tax cut as a way to provide tax relief to those who earn too little to pay substantial income taxes and as a way to put money in the hands of people who could be expected to spend it quickly, thus helping those who make and sell goods.