Amity Shlaes on the Tax Deal

http://www.futureofcapitalism.com/2010/12/amity-shlaes-on-the-tax-deal

Amity Shlaes has a Bloomberg News column critical of the tax deal because of the cut in the Social Security payroll tax. She writes, "Pensions are contracts, even public pensions like Social Security....When a showcase contract like Social Security is compromised, citizens' faith in other contracts, public or private, begins to fray. Their willingness to invest or hire weakens....In its Social Security component the new tax deal honors the precedent set when the federal government sacrificed bondholders and creditors to unions in the recent auto bailouts. It seems any deal or promise is subordinate to servicing the general economy and its managers."

The Bloomberg column doesn't really get into it, but the U.S. Supreme Court, in United States Railroad Retirement Board v. Fritz, expressly rejected this conception of Social Security benefits being a contract, finding, in a majority opinion, that "railroad benefits, like social security benefits, are not contractual, and may be altered or even eliminated at any time."

by Ira Stoll  |  Dec 14, 2010 at 11:07 am Related Topics:  Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list