RUSH: Gabriella Hoffman. “Gabriella Hoffman, a 21-year-old Virginian who works at a nonprofit, her paycheck is a little lighter today thanks to a payroll tax increase that is forcing millions of Americans to make the kind of tough budget cuts their representatives in Washington lawmakers seem unwilling to tackle.” Well, see, Obama explained in his press conference the debt limit isn’t about new spending. Raising the debt limit isn’t about spending at all. It’s just about paying bills.
He’s gonna raise the debt limit to pay for what we’ve already spent, but there’s no new spending in the debt limit. (Well, it’s what he said.) Gabriella Hoffman is 21 years old. As I say, she works at a nonprofit. She “estimates her paycheck will be roughly $30 less this biweekly pay period, or about $780 annually, thanks to the end of a two-year cut on payroll taxes, which fund Social Security. The tax has risen back up to 6.2% from 4.2%, costing someone making $50,000 annually about $1,000 per year and a household with two high-paid workers up to $4,500.”
Look, can I take a brief moment? I want to explain this to you. I’ve gotten in trouble… Well, not really trouble. It’s just people think I don’t know what I’m talking about every time I’ve explained this. The common way of understanding the Social Security or payroll tax is that your employer pays half and that you pay half. And your half is 6.2%, and the employer matches it at 6.2%. In reality, you are paying it all. (New Castrati impression)
“Mr. Limbaugh, each time you try to explain this it gets sillier and sillier and stupider and stupider and it just can’t possibly be true!” Well, let me try again, as Frank Sinatra said when he came out of retirement. “Let me try again.” Very simple. When you get hired by somebody, the total cost — what it costs in total to pay you — is more than your salary. You agree to, let’s say, a salary of $50,000, plus some health care. Let’s say the total cost of an employer to hire you is $60,000. I’m just using round numbers.
So, $10,000 of it you never see because that’s benefits: Sick pay, health care, vacation pay, whatever else. But it’s still costing the guy 60 grand. You see $50,000 of it gross, but you don’t see that. You see the net after deductions. Part of the deduction is the payroll tax. It’s the thing called FICA there on your pay stub, and contrary to the idea that the employer is “matching” what you pay, the employer is paying all 12.4%. What’s actually happening is only half of it is being deducted, so you think you’re only paying half.
But it’s costing your employer all 12.4% to hire you.
Therefore, you’re paying it. The fact that you don’t see it doesn’t mean you’re not being paid it. Just like when you don’t see your health care benefits. It’s still there. So if you’re making 50, it’s costing somebody more than that to pay you the 50 because of the benefits, the unseen things that are being charged, and that’s Social Security. It’s a bugaboo. It’s part of my effort to have people understand economics, but it’s not a deal breaker for me if you don’t get it. If you want to continue to think that the employer is matching your 6.2%, that’s fine.
Here’s the other point about it I want to make. For two years you were only paying 4.2%. Now you’re paying back up to your 6.2%. So instead of paying 12.4%, you were paying roughly 8.4%. So, that FICA money funds Social Security. It is the only way Social Security is paid for. The only way. Not one penny of revenue from anywhere else funds Social Security. So while you did get, while we all got… Well, I didn’t. I’m self-employed, I pay it all.
For certain income brackets, this didn’t apply. (It’s not sour grapes. I’m just being precise here.) The fact is, that payroll tax cut defunded Social Security. Now, how often do you hear elected officials talk about how we can’t do that? They just undercut Social Security by all of this money. They just made it less viable. They were taking money away from Social Security in order to give you the payroll tax cut. Now, Social Security is sacrosanct. You don’t touch it. But the payroll tax cut did, and there’s no way of making that money up.
It’s lost forever now, which just means it’s gonna become insolvent sooner than it otherwise would have. Anyway, the bottom line here is that none of this matters. What matters is, take-home pay is 30 bucks to 50 bucks — in some cases $75 — less per paycheck now than it was in December. This is happening to a lot of people who voted for Obama, and who trusted him when he said that they wouldn’t see a tax increase. So many of them are now engaged in basically self-inflicted injury.
They voted for this.
They don’t understand it.
They’re fit to be tied, and they all think that the Republicans did it!
Here’s Fred in Richland, Washington. I’m glad you waited. Great to have you here, Fred. Hello.
CALLER: Oh, Rush, what an honor, sir. You’ll have to forgive me. I’m a little nervous speaking to you and angry about my taxes. But, yeah, we got the shock of our lives when my wife looked at of her pay stub. She can look it up electronically because she gets direct deposit, and she goes, “Oh, my God, we got 60 bucks missing here,” and I went, “What?” And she goes, “Yeah, we’re lower-middle class. It’s $60 less than it was the last month, and that’s because of the tax hike.” Now, 60 bucks per paycheck times, let’s say, 24 paychecks a year, that adds up to a lot of money for somebody like me.
RUSH: For everybody. Most people, particularly in this economy.
CALLER: Well, in this economy, which is —
RUSH: Every penny counts. We had a call last week from a woman who was in tears here because she didn’t know this was gonna happen, and even a dollar out of her paycheck was causing her incredible pain.
CALLER: Well, if you take $60 over the year, that’s a whole other paycheck. It’s $1440. That’s a lot of fuel.
RUSH: Well, it’s a new muffler. It’s a new muffler. Did you know that this is happening or not?
CALLER: I expected it. I mean, I have to preface this. I didn’t vote for Obama ’cause I knew what he was. I mean, I am not a low-information voter.
CALLER: I’m very learned in the subject and I expected it. But the drumbeat, if you listen to the media, and if you listen to everybody —
RUSH: I know. The drumbeat was that there was not gonna be a middle class tax increase. It wasn’t gonna be. And there is.
RUSH: We go to the Smyrna, Georgia. This is Adam. Great to have you on the program, sir. Hello.
CALLER: Rush, hi. It’s great to talk with you. What a joy.
RUSH: Thank you, sir. By the way, you’re calling from the soon-to-be isolated South.
CALLER: Well, I was actually gonna say I’m deep within the isolated South. I think it’s already partially isolated.
RUSH: And the effort to isolate you is ongoing and intensifying.
CALLER: I can feel the eyes watching and the breath on the back of my neck.
RUSH: I’m not kidding. You have the ability to look at it with jocularity.
RUSH: But there’s an ongoing effort to marginalize conservatism, and the South is the greatest concentration of it, and therefore the words out — Lincoln didn’t finish the job. I mean that was in Salon.com last week. Lincoln didn’t finish the job.
CALLER: And what’s worse is that I’m actually a young pastor, and so I’m probably one of those right-wing kooks.
RUSH: And a target because you preach to others.
CALLER: Yes. Yes.
RUSH: Anyway, I welcome you to the program. I’m glad you’re here.
CALLER: I’m glad I’m here as well. In fact, just holding the line I felt a thrill run up my leg. But the purpose of my call is I’ve actually been on a Meals on Wheels delivery route this morning, and when I walked into the apartment of one of my customers, she’s an elderly minority lady living in poverty, and she had the tube turned on and was watching the press conference, and I said, “How you doing?” She said, “Well, I’m doing all right. I’m just watching my president on this press conference, and I’m trying to get my head around what’s going on.” And she went on to tell me that her Social Security went up $13 bucks, but that really doesn’t matter because she’s been told by her doctor that with everything that’s been transpiring she’s gonna owe $147 for every visit before Medicare even touches it, and she was asking me, “What in the world am I gonna do?” And she said that she feels like she’s kind of being left out in the cold.
RUSH: She said all this to you while she’s watching Obama and his press conference?
RUSH: Does she blame the Republicans for this or did she say.
CALLER: No, she seemed to be feeling a bit disenfranchised, if you will, from her president. She referred to him almost in jest as her president.
RUSH: Did you say this woman’s African-American?
CALLER: Well, I said she’s a minority. She is an African-American.
RUSH: Okay. I was gonna say you don’t sound like a Southerner. You’re helping her.
CALLER: Do what?
RUSH: I’m being facetious. I said you don’t sound like a Southerner, you’re helping her.
CALLER: That’s right. No, you know, it’s interesting because just in my previous interactions with her, I feel like she thought highly of the president. I image she probably voted for him, if she voted. You know, she’s gladly referred to him as her president before, but today —
RUSH: I’m sure. There’s gonna be a lot of confusion. I think there’s going to be a lot of confusion among Obama voters ’cause they believe him. Like the people who are now experiencing smaller paychecks because the payroll tax cut ended, and the full FICA deduction has been restored, so people’s paychecks are smaller. They see this, but they trust the media, they trust Obama. They were told that their taxes aren’t gonna go up. They were told that only the 1% or 2% would see a tax increase, that any taxation had to be fair and balanced and responsible, and that meant they weren’t going to be called on to pay the burden, and here right off the bat, their first paycheck is smaller somewhat or a lot smaller, depending. And they’re going to be, folks, really conflicted.
The media, for the past year, two years, has been spreading the word that the middle class isn’t gonna face a tax increase. Only the rich are. Obama’s been saying the same thing. These people are not going to want to think poorly of President Obama. They voted for him. They’re not gonna want to think poorly of him. So they’re gonna be really confused and conflicted. They believed him. They believed the media. And they still do. So they’re gonna start asking how did it happen. And it’s going to be somewhat easy for the media to somehow blame this on the Republicans, and I think the way they’ll do it is simply say the Republicans wouldn’t negotiate with the president. The Republicans just simply refused to move off of their desire for tax cuts for the rich. And the president tried, he tried very hard.
He worked very hard on this, did the best he could. But now the Republicans are trying to hurt the country and hurt the president again on the debt limit deal, is the way this is all going to play out. None of this, as far as the media’s concerned, none of it will be allowed, if they have anything to say about it, to attach itself to Obama in terms of blame. I’m just telling you this to try to make sure you don’t get as frustrated as you otherwise could, ’cause I know you all sit out there and you pray that at some point this country’s gonna wake up. You pray that at some point people are gonna finally realize that what they’ve been told isn’t true. And they’re not going to want to believe that for a long time. Obama’s a cult-like figure to some of these people. And it’s gonna take a number of these betrayals before they start to substantively question whether or not Obama and the media have been not telling them the truth. Adam, I appreciate the call. God bless you.
Tony, Charlottesville, Virginia, you’re next on the EIB Network. Hello.
CALLER: Hey, Rush. How are you doing?
RUSH: Good. Great to have you here, sir.
CALLER: Yes, sir. I was listening to the gentleman a while ago and listening to you and different stuff like that, and then, you know, of course, talking about the paychecks and, you know, less on the paychecks and all like that. And I was telling the gentleman that answered the phone that something popped in my mind. Wouldn’t you think, Rush, about the idea that Santa Claus, good old Obama, at the end of the year is gonna give people a stimulus check, what have you, for the amount that their paycheck is less?
RUSH: No, I think what he’s going to do is — and that’s of course possible, but I don’t think he’s gonna wait that long.
CALLER: You don’t think so?
RUSH: I think what he’ll do is propose a middle-class tax cut real quick.
RUSH: Maybe even a part of the State of the Union show. Maybe in his inaugural address, because this is gonna take off. I mean, everybody is seeing a tax increase, not just the rich.
RUSH: Everybody is.
CALLER: Right. Right.
RUSH: The way he’ll blame it on Republicans will be to be the one to call for a middle-class tax cut.
CALLER: Oh, okay.
RUSH: Even though he was responsible for the Bush tax rates expiring.
RUSH: He’s the one responsible for this.
RUSH: He’ll shift the blame. I think this is an easy prediction. I made this prediction before.
CALLER: Yes, sir.
RUSH: Even if we didn’t go over the cliff, this tax increase was going to happen, and I think he’s gonna propose a tax cut for the middle class, some way, somehow.
CALLER: Right. One way or the other, he’s gonna come out smelling like the rose, that’s for sure. He’s gonna wash his hands of any wrongdoing, and with the media like it is and the way —
RUSH: Exactly. The media will see to it that Obama comes out smelling like a rose. You’re exactly right.