If you follow policy debates long enough, arguments you never thought you’d hear can become important parts of the two sides’ policy platforms. That’s certainly true when it comes to some Republicans and their new “never Social Security and Medicare” position.
Last week, newly elected GOP Senator JD Vance of Ohio tweeted that former President Donald Trump was 100% right when he demanded that “Republicans should not vote under any circumstances to save a single penny on Medicare or Social Security.”
Vance’s tweet was issued during the debt ceiling battle, but this position has long been held by Trump.
Now, to be fair, the GOP’s well-intentioned involvement in the overall debt ceiling dispute is limited by the short time Congress has to raise the limit, virtually ruling out credible Medicare or Social Security reforms.
Reforming these two programs will take time and require bipartisan action. However, this reality is no reason to argue that the benefits of the programs should never be touched.
I can’t wait to hear the grand plan that the Republican “don’t touch Social Security and Medicare” caucus has to address the $116 trillion deficit over 30 years — that’s 6% of U.S. GDP — that the two programs face. No action from Congress means no money to pay for all the benefits.
That means huge cuts that will hurt the low-income seniors who really depend on the programs.
Of course, if Vance and friends insist on not touching the benefits, they could address the Social Security and Medicare shortfalls with massive tax hikes.
For Social Security alone, when the trust fund dries up, they’ll have to agree to immediately raise the payroll tax from 12.4% to 15.64% — or nearly a 25% tax increase.
Add to that the tax hike needed for Medicare and repeat the exercise over the years to cover the full shortfall.
It’s not that we didn’t warn politicians that these problems were coming.
Back in 2000, about when I started working on tax issues, experts were already warning that the Social Security trust fund would run out of assets by 2037, leading to painful cuts in benefits.
Today the situation has deteriorated further, with the trust fund now on track to run dry in 2035, along with some practical hope of resolving the problem. In other words, these problems should not surprise anyone.
When Social Security started, life expectancy was lower. In 1950 there were more than 16 workers for each beneficiary. That ratio is now below three employees per retiree and will be just 2.3 employees per retiree by 2035.
Add to this trend decades of politicians buying votes by extending benefits beyond incoming payroll taxes, and you have a real fiscal crisis on your hands.
That’s why it’s so disturbing that so many in the GOP are giving up on educating an audience that has been brainwashed for years with misleading sound bites like “You earned your Social Security benefits, so you’re entitled to the benefits now promised,” or “There is a bill with your name on it.”
Such misinformation has made serious discussion of reform very difficult.
There is no doubt that retirees deserve fair treatment, but the facts are that in 1960 the Supreme Court ruled that workers have no legally binding entitlement to Social Security benefits, and if Congress wants to cut benefits even by, say, 50%, it can do so – regardless how much someone paid for the program.
It won’t come to that, but the verdict stands. It is also a fiction that all the promised benefits were earned by workers – they were not.
That’s partly because current retirees are paid with taxes from current employees, not money saved from the payroll taxes retirees paid when they were still employed.
It’s magical thinking to say touching Social Security and Medicare is a nonstarter.
Stranger still, many of the same Republicans want to spare these two programs while still putting Medicaid on the chopping block.
Medicaid should also be reformed, but at least that program serves poor people.
By contrast, the seniors who receive Social Security and Medicare today are overrepresented in the top income quintile, while younger Americans are overrepresented in the bottom quintile.
So these guys want to cut poor people’s benefits on Medicaid while subsidizing relatively wealthy boomers with taxes deducted from relatively poor young people. Yuck.
The transformation of the GOP into the party of the great and fiscally reckless government continues steadily.
Veronique de Rugy is the George Gibbs Chair in Political Economy and a senior research fellow at the Mercatus Center at George Mason University.