Dems should dump Bernie’s Social Security bonanza
As the Democratic nominating process approaches the phase where Bernie Sanders tries to practice the art of the deal, taking a hard-nosed approach toward negotiating party platform language, the Dems would be wise to steer clear of the senator’s Social Security proposals.
Sanders’ insistence on an expansion of Social Security, with more taxes for workers and bigger checks for retirees, would prove counterproductive. According to independent analysis of the plan, the greatest beneficiaries would be the wealthy, while the $1.2 trillion cost of the proposal over 10 years could be better spent elsewhere.
The Democratic leaders who desperately want to get Sanders supporters on board with the Hillary Clinton candidacy would be reminded that pandering to seniors may be good politics, but in this case it’s bad policy.
The Committee for a Responsible Federal Budget (CRFB) took a close look and concluded that for the price of $1.2 trillion the federal government could: fully repeal the non-defense sequester cuts, make college debt-free, double National Institutes of Health research funding, make community college free, establish universal pre-K education, and fully finance the Highway Trust Fund.
That would be quite a list of accomplishments, progressive accomplishments.
Benefits for billionaires
But what would be accomplished by adopting Sanders plan for Social Security? Not what Sanders’ supporters envision.
Because of its standard, across-the-board approach toward the retirement system, the Vermont senator’s plan would spend $42 billion a year more for the wealthiest 20 percent of earners, but only $8 billion for the lowest 20 percent, according to the centrist group Third Way. Wealthy seniors would get $5 in new benefits for every dollar poor seniors get.
What’s more, the Sanders approach, popularized by another liberal Democratic senator, Elizabeth Warren of Massachusetts, seems like a solution in search of a problem.
Currently, about 8 percent of Social Security beneficiaries age 62 or older live in poverty, while many of our inner cities have 30 percent or 40 percent of families living below the poverty line. The CRFB found that average retirement income in the United States is among the highest of the world’s most developed countries – higher than all the Organization for Economic Co-operation and Development (OECD) countries other than Luxembourg and Norway.
Children get shortchanged
Here’ more from the CRFB on disparities in federal spending priorities:
Given that Social Security benefits are already growing rapidly (due to demographics) – so much so that revenue will cover only about three-quarters of costs – it is reasonable to question whether further expanding benefits for middle- and higher-earners is really a wise use of resources.
… Increases in Social Security would actually exacerbate the trend away from spending on investments and on children. According to the Urban Institute’s Kids’ Share report, the federal government spent six times as much on seniors as children (in 2011), and that trend will surely grow under current law with three-fifths of total spending growth over the next decade coming from adults and seniors on Social Security, Medicare, and Medicaid but only two percent from programs for children. Broadly expanding Social Security benefits would give seniors first claim on additional tax revenues and therefore worsen this disparity.
The first sign that the Clinton team may be willing to cave on this fiscally irresponsible approach and embrace an unwise plan for retirees came last week when the nation’s top Democrat, President Obama, said in a speech in Indiana that, “It’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned. And we could start paying for it by asking the wealthiest Americans to contribute a little bit more. They can afford it. I can afford it.”
Increasing the cap on personal income subject to the Social Security tax – currently stuck at $118,000 – is certainly overdue. But policy analysts have found that a more effective means of helping low-income seniors could be accomplished by creating a new minimum benefit, making the benefit formula more progressive, or expanding benefits for widows and widowers.
We shall see in the coming weeks how this plays out, how willing are the Democrats are to cave on ill-conceived liberal policies in order to achieve party unity.
Photo image: Flickr/DonkeyHotey