Job Market Reflected In Payroll Taxes By Ed Henry -- Price of Liberty

March 17, 2005

One of the best indications of the job situation in this country is the amount of surplus payroll tax flowing into the government, particularly in the 12.4 percent every worker pays for his or her supplemental retirement guarantee.

For months now, politicians and their shills have been telling us that Social Security is currently generating more than it needs, but someday this will not happen. So we must act now to “save” the system. Yet, no one asks “how much” Social Security is generating above its needs?

If the public realized how much surplus was flowing into government coffers and what happens to it, they’d be up in arms. But that’s not the subject of this article.

If more people are working and wages are good, then payroll tax receipts go up. If people are unemployed, drop out of the job market, or if many are accepting jobs that pay less, then payroll tax receipts go down. Less comes into government coffers. It’s that simple and direct.

Leaving the 2.9 percent workers pay for Medicare out of the picture and dealing only with Social Security surpluses, here’s the way the government has fared with excess overcharges for the government to blow somewhere else.

We hear stories about things getting better, but now look at what’s been happening in the first five months of fiscal 2005:

Hey, it’s not going down, not any worse than last year. In fact, it’s somewhat amazing that receipts are matching last year so closely. Maybe this is what economists mean by “turning the corner – bottoming out – coming back” and so forth.

On the other hand, if it continues this strange pattern maybe it means that the jobs lost are never coming back, pay scales aren’t rising, and we better learn to live with it. Let’s hope not. If things get better, payroll tax revenue will rise and the Beltway Bandits will be happier too. They might even stop trying to reform a system that doesn't need major surgery.

The January jump is probably due to part-time holiday people laid off by February. And the greater jump in April is probably due to companies that have put off submitting payroll taxes until the last minute, maybe because they’ve been robbing Peter to pay Paul.

Too bad the Beltway Bandits are probably going to be forced to settle for something close to the $71 billion they stole from Social Security last year instead of the gravy train they had in 2000 when we had full employment. Oh well, Bush will just borrow us to oblivion.

Now that I have this chart working, I’ll keep you abreast every few months.

All data is taken directly from the U.S. Treasury Monthly Statements and the first chart is derived by subtracting the “interest” added to the Social Security account. It deals solely with the excess money workers paid.