Don Quixote tilted at windmills. New Jersey Gov. Chris Christie seems bent on running for president, even after his reputation took a whack over that traffic jam on the George Washington Bridge. Even more improbably, he wants to campaign on a sweeping proposal to rein in federal entitlement spending on the elderly.
“It is time to tell the truth about what we need to do,” Christie (R) said Tuesday, positioning himself, like other would-be presidents of the past, as the one guy willing to talk straight about the government’s unsustainable finances. It’s got to work one of these years.
To be sure, nearly everything Christie said was sensible, starting with his emphasis on the country’s still-unresolved long-term debt situation. He noted, in that context, that the child poverty rate is double the elderly poverty rate, making the former a higher priority than the latter.
On that reasonable basis, he urged a phaseout of Social Security benefits for retirees with $80,000 or more in other income and backed a gradual upward adjustment of the retirement ages for Medicare and Social Security, which is also appropriate, given increased life expectancy.
Though Social Security’s short-run finances are relatively sound, it remains a non-trivial cause of the government’s long-term fiscal imbalance. Its trust fund, admittedly an accounting fiction of sorts, is on course to run out of cash by the early 2030s. Christie’s plan would provide three-fifths of the resources necessary to guarantee Social Security’s solvency for 75 years, according to an analysis by the Center for a Responsible Federal Budget.
It would also provide abundant fodder for 30-second attack ads by the Democrats, whose party orthodoxy is steadily moving in favor of various plans that would significantly increase Social Security monthly benefits, and juice the cost-of-living adjustments, preserving the system’s 75-year solvency by imposing Social Security payroll taxes on income well beyond the current limit of $118,500.
Though likely Democratic nominee Hillary Clinton hasn’t embraced such a proposal yet, she is being strongly pressured to do so by Sen. Elizabeth Warren (D-Mass.), the AFL-CIO and other tribunes of progressivism.
The irony is that the progressive plan and Christie’s plan are equivalent, at least in their very broad financial strokes. Both claim to match Social Security resources and obligations over time, and to accomplish this progressively; that is, with upper-income folks bearing a relatively higher share of the adjustment costs. This is, indeed, an appropriate goal.
The main difference, really, is that Christie would achieve it by cutting top-end benefits; the progressives achieve it by raising top-end taxes.
No doubt, the Warrenite approach — take from the rich, give to grandma — is a far, far easier sell, politically. A 2014 poll by Lake Research Partners found that the vast majority of Americans, including three-quarters of Republicans, favor “increasing Social Security benefits and paying for that increase by having wealthy Americans pay the same rate into Social Security as everyone else.”
Come to think of it, the whole Warren-led campaign looks less like a serious response to the elderly’s real economic situation, which remains comparatively favorable, and more like a poll-tested response to the fact that the formerly reliably Democratic over-65 bloc has swung to the Republicans in the past 10 years. (According to Gallup, the elderly now favor the GOP by three percentage points, a 16-point switch since 2006.)
As fiscal policy, though, the advantages are somewhat less clear, at least under current law. Higher Social Security taxes on upper-income workers would mean higher benefits for them, too, since what you get out of the program depends on how much you put in — though some versions of the Democratic plan would make sure that, say, Warren Buffett couldn’t get $3 million per year in Social Security.
“You’re just running more money through the government,” says Phillip Swagel, a former assistant treasury secretary who teaches public policy at the University of Maryland.
A more fundamental problem is that all of the proceeds of what would be a massive tax increase on top earners get spent on a single purpose — increasing benefits for mostly non-poor elderly — rather than on other, more pressing priorities. And, as Swagel puts it, “you can only frack that well once.”
By contrast, reining in benefits, as Christie proposes, preserves “fiscal space.” It thereby frees government to choose more readily among competing priorities, old and new, which is precisely what a government whose revenue is precommitted to mandatory transfer payments can’t do.
You might even say Christie’s plan restores the basis for future active government — a point that neither he and his fellow Republicans nor their Democratic foes have the slightest interest in acknowledging.
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