Marxists used to vow that capitalism’s “internal contradictions” would reach the point when the system would implode. “That’s when we make our move!” said the coffeehouse strategists.

Struggling Democrats face a less easily parodied but more consequential contradiction as the debate on economic stimulus heats up. It’s the tension between the call by some Democrats to cut payroll taxes to boost the economy and the fact that because payroll taxes finance Social Security, touching them can be cast as “undermining Social Security.”

On the merits, there’s no question that temporary payroll tax relief would be a better economic stimulus than new or accelerated tax cuts for wealthy Americans.

A payroll tax “holiday” would put cash in the hands of people likely to spend it and make it less costly for firms to add jobs. Since the Federal Reserve is running out of room on interest rate cuts and growth is still sluggish, this kind of fiscal jolt (which is easy to implement fast) makes sense. Politically, it lets Democrats argue for a break for average workers, not more trickle down for the top.

But you can’t cut payroll taxes without someone asking, “Hey, what about the Social Security trust fund?” As a matter of accounting, payroll tax cuts will leave the trust fund with less money than it would otherwise have. In the ordinary course of business, this is the kind of thing that Democrats love to demagogue – as when they bash the GOP for using Social Security surpluses generated by the sacred payroll tax to pay for other spending (something Democrats have done for years as well).

This political sensitivity usually keeps even fair-minded Republicans from wanting to mess with payroll taxes at all. It also conveniently lets the GOP skew public debate by focusing on the income tax – paid disproportionately by the well-to-do – as if it were the only real tax in the country.

These dynamics are disastrous for Democrats. When you include the portion of the payroll tax paid by their employers (which economists say effectively comes out of workers’ wages), four in five Americans now pay more in payroll taxes than in income taxes. Rather than representing some sideline levy earmarked for pensions, regressive payroll taxes have quietly soared from 2 percent to 37 percent of federal receipts since World War II. The income tax produces 49 percent of federal revenue.

Democrats should want to do something about this. But they can’t have it both ways. They can’t slam the GOP for using payroll taxes for any purpose other than Social Security and then turn around and do the same thing themselves.

A grown up Democratic Party would change the debate. It would admit and explain to people that the Social Security trust fund is an accounting fiction, a pile of IOUs slated to be redeemed by raising taxes on our kids. They’d say it’s time we moved past such fictions and talked about overall tax fairness in the context of paying for the baby boomers’ golden years while doing the things people under 65 expect from government, too.

But Democrats can only tilt the debate in this progressive direction if they’re willing to give up the usual Social Security demagoguery. You’d think they’d be ready; after all, it failed miserably in the midterm elections. Republicans Elizabeth Dole, Lindsey Graham and John Sununu will all take Senate seats despite relentless and misleading attacks on their ideas about partial privatization.

I’d like to think Democrats are ready to move to smarter ground. I’d even be willing to help them cook up some new demagoguery to replace a brand that (A) misleads voters about the need for change and (B) doesn’t work anyway. But I don’t think they’re there yet.

These are the deeper political and policy issues lurking behind a simple-sounding debate over short-term stimulus. They’ll be with us long after the economy recovers. If we do get a payroll tax cut, and deal with the trust fund sideshow somehow, it will mean an important Rubicon has been crossed. I’m not holding my breath.

Matt Miller is a syndicated columnist. His e-mail address is: mattino@worldnet.att.net.

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