Warning: It’s depressing. There are few reform plans, and only two that promote generational justice.
The leading presidential candidates’ positions on Social Security reform can be grouped into four camps: (1) status quo – Hillary Clinton, Ted Cruz, and Donald Trump (politics does indeed make strange bedfellows); (2) tread lightly – John Kasich and Marco Rubio; (3) expansion – Bernie Sanders; and (4) shift to insurance – Jeb Bush and Chris Christie. Beyond enjoying the wry smile that may have been induced by learning that Mrs. Clinton, Mr. Cruz, and Mr. Trump actually have something in common, why should members of the 2040 Matters community care?
Over the past several weeks, I have discussed generational justice as a core component of the American Dream; argued that the 2040 Matters community should assess presidential candidates partly based on their commitment to generational justice, particularly reform of the so-called “entitlement” programs; and highlighted the serious funding shortfalls facing the largest of these programs — Social Security. With the Iowa Caucuses and the New Hampshire Primary just weeks away, it is time to take a close look at the leading candidates’ positions on Social Security reform to see who has a plan that reflects a commitment to generational justice.
Unfortunately for Generation X+, there is not much to see and even less to support. Even though they “didn’t start the fire,” most of the leading candidates would prefer to play the part of Nero, fiddling while Social Security burns.
I consider the “leading candidates” to be those who are currently polling above 5% in New Hampshire. Reasonable people could debate this methodology, but I used these poll results because New Hampshire often serves as a bellwether State given that its primaries attract a large number of independent voters. The 5% threshold allowed me to cull the fields without limiting my analysis to a handful of candidates at this early stage of the election cycle. Under this methodology, I reviewed the entitlement reform positions of the two leading Democratic candidates: Hillary Clinton and Bernie Sanders. On the Republican side, I examined the positions of six candidates: Donald Trump, Ted Cruz, John Kasich, Jeb Bush, Marco Rubio, and Chris Christie.
In order to determine a candidate’s position, I looked at his or her official website. I limited my review to the official websites because they publish positions that have been vetted by policy advisors and deemed integral to the campaigns.
Based on my review, it would be fair to say that although “we’re not in the middle of nowhere” on Social Security reform, “we can see it from here.” Most of the leading candidates do not have serious reform proposals, those that do on the Republican side are not doing well in the polls, and Bernie Sanders’ proposal would double-down on the inter-generational wealth transfer from the young to old at the heart of Social Security. (Remember, Social Security is a “pay as you go” system – today’s workers fund today’s retirees.)
On the Democratic side, both candidates discuss Social Security, but only Mr. Sanders sets forth a reform plan. His reforms include increasing benefits for all recipients, using a more generous cost of living adjustment, and implementing payroll taxes on incomes above $250,000/year.
Mrs. Clinton primarily defends the status quo by attacking Republicans and outlining a laundry list of reforms she would oppose: privatization; benefit reductions or tax increases that affect the middle class; an increase in the retirement age; and a change in the annual cost of living adjustment formula. As for actual reforms, she proposes to increase benefits for widows and those who leave the workforce to care for an elderly parent. She supports unspecified payroll tax increases on the wealthy.
On the Republican side, Messrs. Trump and Cruz do not even mention Social Security reform on their websites.
Messrs. Kasich and Rubio both express cautious support for entitlement reform, but offer no plans for achieving this reform. Mr. Kasich pledges to put together a commission on Social Security reform. Mr. Rubio tentatively suggests three broad principles that could guide potential reform efforts: gradually increasing the retirement age; decreasing the rate of growth in benefits for wealthier recipients; and improving benefits for low-income seniors.
Messrs. Christie and Bush both offer substantive, and very similar, reform proposals. Although there are modest differences, their plans include increasing the retirement age, implementing means-testing to decrease the benefits paid to wealthier retirees, and eliminating the payroll tax for elderly Americans who remain in the workforce. They also discuss changing the cost of living adjustment formula and increasing minimum benefits for certain retirees.
So where does this leave Generation X+? Left holding the bag, most likely.
The status quo and tread lightly camps completely fail to address the shortcomings in Social Security and the burdens it imposes on younger Americans – payroll taxes today in exchange for increased debt and reduced benefits tomorrow. Insofar as Mrs. Clinton’s plan arguably departs from the status quo, it is most similar to Mr. Sanders’ plan.
And Generation X+ should be deeply skeptical of Mr. Sanders’ expansion plan. To begin with, it is unlikely that his proposed payroll tax increase would cover the cost of his proposed benefit increases and remedy the existing Social Security funding shortfall, thereby adding to our deficit and debt.
Moreover, in the event there were excess payroll taxes in any given year, they would be used to purchase Treasury bonds. Instead of investing these funds for future retirees, Treasury would spend the funds to cover the costs of other federal programs. This is precisely the unstable and unsustainable position the program is in today. Before supporting Mr. Sanders’ plan, young Americans should “remember the bills [they will] have to pay.”
But perhaps the biggest problem with Mr. Sanders’ plan is that it doubles-down on the inter-generational transfer of wealth. Mr. Sanders’ proposes taxing wealthier younger Americans – people who are working, providing for their families, and saving for their retirements – in order to increase retirement benefits for older Americans today, including those who do not need them. Rather than asking wealthier older Americans to forego benefits they do not need, Mr. Sanders wants younger Americans to pay more in taxes. Although his tax increase is purportedly progressive, it is nonetheless contrary to generational justice, particularly because the unaddressed instability in the system will perpetuate the risk that younger Americans will never see their promised Social Security benefits.
Messrs. Bush and Christie take the opposite approach. Rather than tax younger Americans more, they ask wealthier older Americans to forego benefits they do not need, and propose mechanisms for preventing lower income seniors from falling into poverty. One can debate who is a wealthier retiree, but both plans reflect Social Security’s fundamental purpose: Insurance against poverty in old age. 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 Social Security.
Unfortunately, for those of us who care about achieving meaningful Social Security reform, it already looks like we “can’t get there from here.” Three of the top four candidates fail to offer reform plans, and the fourth offers a plan that exacerbates the flaws in the current system and is entirely inconsistent with generational justice. The candidates with the best reform plans are generating little enthusiasm. The remaining candidates are reluctant to propose real reform. Although the first vote has yet to be cast, this is a sad state of affairs for Generation X+ and the 2040 Matters community. We deserve, and should demand, better.