Yesterday I suggested that Republicans start using income inequality against the president in the fight over entitlement reform. To be fair, some Republicans have been doing just that.
On “Meet the Press” on Sunday, Senate Minority Leader Mitch McConnell (R-Ky.) argued: “I’ve said repeatedly publicly, and other members have, that until you adjust the eligibility for entitlements, do things like raising the age for Medicare for future beneficiaries. Not for those currently receiving or those about to receive. Have serious means-testing for high-income people. You know Warren Buffett’s always complaining about not paying enough taxes. And what I’m complaining about is we’re paying for his Medicare. We ought not to be providing these kinds of benefits for millionaires and billionaires.” Exactly so.
Well before he was picked as the GOP’s vice presidential nominee, Rep. Paul Ryan (R-Wis.) was addressing this issue. When the Congressional Budget Office came out in 2011 with a report on rising income inequality, Ryan authored a report in which he argued:
According to the CBO, “Because outlays on programs focused on the older population (such as Social Security and Medicare) have grown faster than outlays on other transfer programs, the share of transfers received by elderly childless households has likewise increased” – from 62 percent in 1979 to 68 percent in 2007. . . .
This large increase in spending on non-means-tested programs for a relatively well-off demographic was less a result of explicit government actions than a combination of demographic and health care cost factors. A fixed retirement age, a lengthening of life expectancy, the retirement of the baby-boom generation, and rapidly rising health care costs worked in concert to reduce the overall progressivity of government transfer payments during the period studied.
Put differently, we are giving a lot of benefits to rich people who are capable of paying some of their own retirement costs. Ryan recommended “a premium-support system that provides more help for the poor and the sick, and less help for the wealthy.” During the campaign, Ryan spoke about adjusting the cost-of-living increase for Social Security so wealthier people’s benefits would grow at a slower rate than those less well off.
Democrats have consistently opposed means-testing both because they aim to grow the welfare state, not reduce it, and because they sincerely believed that support for these programs would erode if they were seen as welfare programs for the poor. The latter conclusion, I think, no longer holds water. The public has come a long way on the debt, and just as they have accepted a progressive income tax, they will, if both parties get on board, accept that the rich must pay a little more. (Isn’t that what the president keeps saying about taxes?)
Republicans have a powerful argument on their side. They’ve recognized that given our fiscal dilemma (and more directly the expiration of the Bush tax cuts and President Obama’s reelection) that the very rich will have a higher marginal tax rate. Now they want to be consistent and say that, on the benefits side, the system should also be skewed toward the less well-off. Really, aren’t Warren Buffett’s open-ended Medicare benefits effectively taking money away from old and young poor, sick people? Why should his secretary have her benefits slashed so he can get deeply discounted medical care?