Given their lack of interest in Social Security reform, it is hardly surprising that generational justice in the form of entitlement reform is not a priority for most candidates.
Just like their positions on Social Security reform, the leading presidential candidates’ positions on Medicare reform can be grouped into four virtually-identical camps: (1) status quo – Hillary Clinton, Ted Cruz, and Donald Trump (obviously a popular position in Iowa across both parties); (2) tread very lightly – John Kasich and Marco Rubio; (3) expansion – Bernie Sanders; and (4) means-test – Jeb Bush and Chris Christie. Beyond considering the unfortunate irony that the only candidate who is takes pride in being a member of Generation X does not seem to be very interested in generational justice, why should members of the 2040 Matters community care?
As regular readers of this Blog know, I have previously argued that the generational justice requires addressing the serious funding shortfalls facing Social Security without requiring younger Americans to pay even more to subsidize the retirement of wealthier older Americans or continuing to borrow to pay retirement benefits, thereby saddling future generations with even more debt. The same is true for Medicare, which is the fastest growing expenditure in the federal budget. Not only do we heavily tax today’s workers to pay for Medicare, but these payroll taxes are woefully insufficient to cover the cost of the entire program. As a result, we must borrow billions every year to provide healthcare to elderly Americans, saddling future generations with even more debt. This course is unsustainable and unfair to the young. As we head into the primaries, the question facing Generation X+ is whether there are any credible Medicare reform plans that reflect a commitment to generational justice.
For Generation X+, there are only three candidates with serious reform plans – Bernie Sanders, Jeb Bush, and Chris Christie. The plans all have flaws, although Messrs. Bush and Christie are better attuned to generational justice, at least insofar as they do not believe that younger American should subsidize the healthcare of wealthier retirees.
On the Democratic side, Mr. Sanders proposes “Medicare for All.” He intends to convert Medicare into a universal healthcare program for all Americans, not just the elderly. In addition to improving access to healthcare, he believes his plan will reduce overall healthcare spending and improve the quality of care. He proposes to pay for his plan with large tax increases that would affect workers at all income levels: a 2.2% payroll tax on individuals, a 6.2% payroll tax increase on employers, and substantially increased marginal tax rates on those making over $250,000/year. His plan is silent on whether wealthier Americans would be subject to means-testing, but it seems highly unlikely given his views on expanding Social Security benefits.
Given that Mr. Sanders is quite popular with younger Americans, his plan warrants careful scrutiny from a generational justice perspective. On the positive side, “Medicare for All” would be less of an inter-generational transfer of wealth than the current Medicare program because today’s workers would receive an immediate and tangible benefit in return for their increased taxes. Although there is widespread debate whether a single-payer system would reduce healthcare spending in the U.S. or improve the quality of healthcare, insofar as these potential benefits would accrue to younger Americans, they are not inconsistent with notions of generational justice.
Younger Americans would, however, continue to subsidize the healthcare of elderly Americans, even wealthier Americans who would not need the subsidy. I realize that for many younger Americans, access to healthcare is a social justice issue. But they should not let their quest for one type of social justice blind them to the social injustice of unnecessary inter-generational wealth transfers. Is it better to pay a dollar in taxes to provide a benefit to someone who doesn’t need it or use that dollar to pay down your student loan debt, put a down payment on a home, or contribute to a 529 Plan or an IRA?
The same is true for the injustice that results from one generation borrowing to achieve its desired standard of living and forcing future generations to foot the bill. On that note, Mr. Sanders’ plan would almost certainly not pay for itself, even with the substantial tax increases he proposes. This means that Medicare spending would continue to impose a substantial burden on younger Americans in the form of increased debt – debt that must be serviced by reducing discretionary spending and/or raising taxes.
With increased taxes (including additional taxes to pay for Mr. Sanders’ other spending proposals) and increased debt, younger Americans should also be seriously concerned about a potential drag on economic growth and their future wages. Moreover, although Mr. Sanders notes that workers and their employers would no longer share the costs of health insurance premiums, this is only true for those employers who currently sponsor health insurance plans for their employees (and many small businesses do not). Moreover, even for those employers that pay a share of health insurance premiums, the reduction in premium costs may not fully offset the impact of Mr. Sanders’ proposed payroll tax increases. Thus, for at least some Americans, single-payer would mean reduced future wages. And Millennials who fall into this group (who would have many years under a single-payer regime) would not fare very well compared to younger Boomers under Mr. Sanders’ proposal. Is this social or generational justice?
On the Republican side, Chris Christie and Jeb Bush both offer substantive reform proposals, with Mr. Christie actually casting his proposal as a matter of generational justice. Although there are differences in the plans, they both propose means-testing to decrease the benefits paid to wealthier retirees in an effort to control Medicare costs and reduce future deficits and debt. Viewed in isolation, these proposed reforms are not only consistent with generational justice, but they are also “progressive” – wealthier Americans are asked to do more to shore-up Medicare. However, when considered in conjunction with the candidates’ proposed tax reforms, the deficit and debt reduction benefits of these reform plans are substantially undermined, which in turn undermines their benefits for younger Americans.
In sum, generational justice in the form of Medicare reform is getting short-shrift in this election season. Ms. Clinton and the top three Republican candidates in Iowa have avoided generational justice issues altogether, without any repercussions. Mr. Sanders is wildly popular with younger Americans, but when considered carefully, his entitlement expansion proposals are hardly models of generational justice. Messrs. Bush and Christie view Medicare reform as a matter of generational justice, but are trailing badly in the polls and undermine their commitment to generational justice with tax reform proposals that would almost certainly increase our debt.
“Reality Bites.” But it doesn’t have to.
So what should Generation X+ do with this mixed bag? First, although I do not favor single-issue voting, I do believe that those candidates who favor meaningful entitlement reform should merit more serious consideration by Generation X+ voters than those who ignore the issue or promote the status quo. Second, we should not let the remaining candidates off the hook so easily. Those that are avoiding generational justice issues should be forced to articulate and defend positions on entitlement reform as the fields narrow and the surviving candidates face greater scrutiny. Generation X+ must do more to ensure that generational justice features as a key issue in the primaries and the general election. If we do not, we will have only ourselves to blame when we cannot retire with dignity and our children cannot live with the debt we have foisted upon them.