Social Security on Ice
MAYBE IT'S just not possible to have anything approaching a serious discussion about Social Security in the midst of a presidential campaign. Maybe the best that can be achieved is do-no-harm Social Security detente, in which neither candidate so boxes himself in that his choices in office would be even more constrained by politics. That, at least, is where the 2008 candidates seem to be settling. The last few weeks have featured John McCain putting tax increases on and off the table quicker than a newlywed trying out china patterns, while Barack Obama, having proclaimed himself the truth-teller about making tough choices, proceeded to duck them.
In February, Mr. McCain seemed to be following in the "no new taxes" footsteps of the first President Bush, who lived to rue that pledge. Asked by ABC's George Stephanopoulos if he was a "read my lips" candidate, Mr. McCain obliged: "No new taxes," he said. Then, back on the same show last month, Mr. McCain sounded different -- and, to our ears, much more responsible -- when asked if he would rule out a payroll tax increase as part of a larger Social Security fix: "There is nothing I would take off the table," he said. Naturally, that got him clobbered by anti-tax conservatives. It didn't take long for Mr. McCain's own spokesman to repudiate Mr. McCain. "There is no imaginable circumstance where John McCain would raise payroll taxes," said spokesman Tucker Bounds. "It's absolutely out of the question." Except that it might not be. "Sen. McCain believes you can solve Social Security without raising taxes, but he also believes you can't start a negotiation with an ultimatum," said spokesman Taylor Griffin.
Switch to Mr. Obama, who got some credit from us during the primary campaign for at least acknowledging that dealing with Social Security would entail some difficult choices. Last November, Mr. Obama was saying, on NBC's "Meet the Press" that "we're going to have to make some decisions, and it's not sufficient for us to just finesse the issue because we're worried that, well, we might be attacked for the various options we present." Of course, Mr. Obama was promptly attacked, including by Hillary Clinton, for presenting one option -- an increase in the payroll tax for taxpayers making more than $250,000 a year. Now, Mr. Obama has refined the details of that proposal, and to call his approach finessing would be awfully generous.
As laid out in a Wall Street Journal op-ed by economic advisers Jason Furman and Austan Goolsbee, Mr. Obama's tax increase would not take effect until 2018 -- yes, after both terms of an Obama presidency. One argument for this delay is that raising Social Security taxes now would just allow lawmakers to spend more of the existing surplus on other things; it's not until 2018 that the income from payroll taxes would fall short of paying promised benefits. But surely President Obama could find some way to bring in money sooner without letting Congress fritter it away on other needs.
Meanwhile, under the revised Obama plan, additional Social Security taxes on the top earners would be between 2 and 4 percent. That's only sensible: Soaking the richest taxpayers with the full tax would push marginal tax rates to dangerously high levels. Meanwhile, the Obama campaign has been deliberately obscure about whether the tax would apply to all income (including investment earnings could raise significantly more revenue) and whether those paying more taxes would receive extra benefits (in which case much less of the shortfall would be filled in). What's clear is that, however the Obama plan is crafted, it would not come close to solving the fundamental problem that Social Security revenue will not be able to pay promised benefits. Even assuming that Mr. Obama would tax all income and would not increase benefits, he would make up one-third of the projected 75-year shortfall.
So does Mr. Obama get credit for being brave -- or foolhardy -- enough to put out a tax proposal that is sure to be used against him? Does he get demerits for failing to be more specific, and more honest, about what will be required? Or does it turn out, sadly, that the "textbook Washington campaign" he derided Clinton for running, in which "you don't present tough choices directly to the American people for fear that your answers might not be popular, you might make yourself a target for Republicans in the general election," has something to recommend it after all.