The problem with means-testing entitlements

One of the things that the Bern and the Hill agree on is that the government should do more to help Americans access life’s necessities. Sen. Bernie Sanders (I-Vt.) and former secretary of state Hillary Clinton both support, for instance, putting tuition at public colleges and universities on the taxpayers’, rather than students’, dime.

But Sanders wants to make tuition-free education at these colleges a universal right, while Clinton wants to exclude students from affluent families. The difference here is more political than budgetary.

The reason it’s not budgetary is that Sanders supports sufficient tax increases on the wealthy to cover the cost of universal free tuition, and then some. By raising taxes on investment income, financial transactions and the overall income of the richest Americans, as Sanders has advocated, the programs that Sanders champions would be fully paid for. Say what you will about Senator Socialist, he’s no budget buster.

Today, the wealthiest 1 percent pay one-third of their income (which averages $2.1 million) in federal taxes, according to the nonpartisan Tax Policy Center. The top 0.1 percent, with an average income of $9.4 million, pay 35 percent. If the rate on that 0.1 percent were raised to 40 percent, the additional funds would cover Sanders’s free tuition proposal. At 45 percent, they would cover the $2,500 child tax credit proposed by Republican presidential hopeful Sen. Marco Rubio (Fla.).

So the money is there for these kinds of programs — provided we’re willing to make taxes more progressive, and tax income from investments (much of which is investment in multinational corporations that, rather than producing jobs in the United States, have offshored their labor) at the same rate we tax income from work (which is collected only on work done in the United States). Republicans reflexively oppose virtually all tax increases on the rich, of course, though they also pine for the domestic tranquility of the 1950s and celebrate the Greatest Generation. It was during those ’50s, however, in the reign of Republican Dwight Eisenhower, that the marginal tax rates on the wealthiest Americans peaked at just over 90 percent. Would an Eisenhower-era rate — a marginal rate high enough to generate a total tax of 45 percent — prompt our super-rich to pull up stakes and become citizens of the Cayman Islands? If they did, they could no longer legally contribute to U.S. political campaigns — a trade-off I think most Americans would accept in a nanosecond.

So the debate on universal vs. means-tested programs is less budgetary than it is political. Sanders’s belief in certain basic and universal rights — to adequate health care and to education, for instance — is rooted in his social democratic worldview. But it’s also rooted in mainstream American liberalism, in Franklin Roosevelt’s 1944 Economic Bill of Rights, and in the two great universal programs that even Republicans can’t flat-out oppose: Social Security and Medicare.

The centrist case against creating any more universal programs is most commonly rooted in the premise that we can’t afford them — though such arguments generally take for granted that sufficiently raising taxes on the wealthy isn’t really an option. (Clinton does favor some tax increases on the wealthy, though they pale alongside Sanders’s.) Fundamentally, that’s an argument rooted in politics, not math. These arguments would be more serious if their proponents at least tried to explain why taxing the super-rich at significantly higher rates is a bad idea.

The proponents of means-tested programs also need to grapple with the problem inherent in such policies: They’re politically vulnerable and consequently can be scaled back to the point where they’re ineffective. The attacks on Medicaid, Obamacare and (now largely defunct) federal welfare programs all engendered and exploited anger in Republican-leaning portions of the electorate, and fear that their tax dollars were going to support people not like them — the poor, probably of a different race, surely undeserving.

Consider the following thought experiment: Suppose, instead of advocating for Obamacare and an expansion of Medicaid, the Obama administration had proposed extending Medicare to people over 50. Could Republicans have rallied those groups most fiercely opposed to Obama’s actual initiatives — the white, working-class Republicans who disproportionately constitute Donald Trump’s base — to oppose this? I doubt it. The main opposition would have come from the kind of financial elites given voice by the Simpson-Bowles Commission, volubly opposing the threat to balanced budgets and less volubly opposing the significantly higher taxes on wealthy Americans that expanding Medicare would require.

Both Clinton and Sanders want to make life’s necessities more affordable. The differences in their approaches are a matter of tax policy and political choice.

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