It was only when the first cries over President Obama's compromise with the Republicans began to settle that calmer analysis over its impacts kicked in.

Thomas Schegel, one of my Well colleagues, grasped immediately the potentially grim scenario ahead. It's not so much a matter of numbers and percentages. It's about handing the Republicans yet another tool to hype their alarm cries over the Social Security "crisis". And ironically, it could make that crisis a reality.

Tom's given me permission to excerpt his thoughts on the issue. Added emphasis is mine.

 Obama and Biden have made a grave political error by putting the Social Security tax holiday idea onto the table and allowing it to be incorporated into the package with the Bush Tax Cut extensions.  In terms of fiscal policy there is a good argument for this temporary 2% cut in the Social Security contribution from 6.2 to 4.2%.   It is mildly progressive in that it increases the take home pay on the first $108,000.00 of income. Its benefit is thus limited for people with very high wage levels.  So as a Keynsian stimulus measure the idea has its merits.

But for the Democrats, and the Obama Administration in particular, this looks to me like a slippery slope toward a place they REALLY don't want to be, dismantling Social Security.  The argument is this,  the Republicans have long found Social Security an anathema.  One of the Bush 43 Admini-stration's goals was privatizing Social Security.  Various Republicans have also talked about cutting or means testing the benefits.  These ideas failed to get traction with the wider public.  People like Social Security because it works.  And, financially, it  does work. It is fiscally efficient, it has very low overhead.  Although Republicans like to talk about the "Social Security Crisis", the fact is that there isn't much of a problem (unlike Medicare which DOES have a future funding problem).  Yes, if current trends continue there will be a funding shortfall some time in the decade of the 2040s, but that can easily be taken care of if, sometime in the next decade - sooner is better, we slightly increase retirement ages or slightly increase the contribution rate.  However by taking this Social Security tax holiday the future of Social Security becomes less sanguine.   And this is where the Democrats weakness at setting the political agenda is going to bite.

The scenario is this.  After a year the economy is still weak and people have become used to their new take home income levels at the 4.2% rate.  So one suspects that the holiday will be continued because, the Republicans will point out, it would be a TAX INCREASE to do otherwise. Democrats, as they are today with the Bush tax cuts, will be frightened of being labeled as the party of taxation.  However when this lower social security tax rate is projected out onto the next couple of decades there really will be a Social Security Crisis.  The obvious Republican response will be to hammer on this "fiscal irresponsibility"  in order to advocate to have Social Security benefits cut, means-tested, or privatized.

 There is no reason this has to happen, except that the Democrats show NO ability to control the political agenda.  Two years from now in his attempt to get reelected and faced with accusations of Democratic fiscal irresponsibility I fear that Obama will be telling us that he must compromise with Repub-licans and the bond markets by supporting some sort of half assed Social Security privatization scheme.  The starting point was this week when they accepted the Social Security tax holiday.

With the proviso that I have the average lay person's grasp of economics, this reads real to me. Setting aside the bitter arguments over whether Obama has yet again  capitulated before fighting, this strikes me as genuinely alarming.