Of the many issues which raged in the national debate during the 2004 election cycle but have since fallen down the memory hole, Social Security is surely one of the most curious among the missing. I have never counted myself among the masses crying out that the Social Security system is “hopelessly broken” or needs to be scrapped entirely. However the inversion from an era when a large number of workers were supporting a proportionally smaller number of retirees to the emerging period where a smaller proportional workforce will be supporting the baby boomers has created a bit of a pig in a python. The math indicates that – at a minimum – some adjustments will be required to maintain the current system in a sustainable fashion. How do our candidates stack up on this issue?
Let’s start with John McCain. I agree, at least in part, with the assessment of Peter Wallsten at the LA Times who describes McCain’s position as “somewhat fuzzy.” In 2005 Senator McCain was hitting the trail hard with President Bush, pushing for privatization of the system, but seems to have since modified his policy. From the McCain website, we find that the candidate now:
…supports supplementing the current Social Security system with personal accounts – but not as a substitute for addressing benefit promises that cannot be kept.
I have no problem with offering more options to workers if they wish to beef up their retirement portfolio in this fashion, providing it doesn’t erode the support base for the system. How will he pay for the continued health of the system? That part is a bit less clear. He insists on keeping to the party line that he will not tolerate any increase in taxes in any form, but seems to provide no specifics on how he plans to pay for it. This, it seems, is no accident.
McCain and his aides say the lack of specificity is intentional — the result of lessons from 2005, when Bush tried to sell a skeptical public on private accounts.
“There’s a really careful recognition of the history,” said Douglas Holtz-Eakin, McCain’s economic advisor.
“The history on Social Security has been if you put out specific proposals or preconditions, you polarize the debate and the deal doesn’t get done.”
The Obama campaign web site is, to the best of my searching ability, completely silent on the issue of Social Security, but does have this to say on retirement issues in general:
Currently, 75 million working Americans – roughly half the workforce – lack employer-based retirement plans. Even when workers are given the option of joining employer-based plans, many do not take up the option because it requires considerable work to research plans and investment portfolios, and enroll in the plan. Barack Obama’s retirement security plan will automatically enroll workers in a workplace pension plan. Under his plan, employers who do not currently offer a retirement plan, will be required to enroll their employees in a direct-deposit IRA account that is compatible to existing direct-deposit payroll systems.
I too miss the days when companies offered long, fat retirement plans as part of the employee compensation package, but alas… those days are mostly gone. But we are not children. I immediately get that tick in my left eye again when I hear politicians talking about forced programs to determine how we will feather our nests. Obama’s plan allows employees to “opt out” by signing a waiver, so it seems a needless exercise in nannyism.
As to social security itself, the Senator was quoted in another article as planning on changing the base tax structure to fund the program. He woud freeze the Social Security Wage Base thresholds at their current cap of $102,000 per year, while putting in a “donut hole” plan which would add a new SS tax for those earning over $250,000.
I suppose I don’t understand the need for this “donut hole” beyond the blatant politics of not raising taxes on “the middle class.” If you follow the last link, you will see that the wage base threshold has gone up, on average, roughly $3,000 each year since 2000. This is in response to changes in wages and other economic conditions. He does not, however, favor any increase in the current participation rate of roughly six percent each for the employee and the employer for all income up to the wage base cap. (Nor does McCain, obviously.)
There you have it. I find myself highly disappointed in both of the candidates’ positions (or lack thereof) on this issue. I give full credit due to Obama for recognizing that something needs to be done and that it might involve some pain in the pocketbook to address it, but I will have to give a very, very halfhearted tip of my hat to McCain on this one. I would call on Senator McCain to firm up the specifics of his plan, (which may change my final decision) but the nanny state attitude and weak sister political waltzing around the tax issue by Obama scares me away from awarding him the point on this one. If the Social Security threshold or the minimum retirement age must be raised to get the system on solid footing, just have the courage to do it and let us judge your decision.
Previous Hat Tips:
Iraq – Point to Obama
Energy Policy – Point to McCain
Iran and Israel – Point to Obama
e-mail the author: [email protected]
Archive of my columns