Trumpism Makes Social Security and Medicare Less Safe
Donald Trump says Paul Ryan is wrong about Social Security and Medicare. The Republican speaker of the House wants to “knock Medicare way down,” according to Trump, and do the same to Social Security. Trump says this approach would cost Republicans the election, and also be unfair to people who have paid into these programs.
Commentator Michael Lind concludes that “Trumpism” is the future for the Republican Party, which will have to “move left on entitlements.” But it’s the future only if the future doesn’t know math.
Trump has said he would make Social Security solvent by cracking down on “waste, fraud, and abuse,” by cutting foreign aid “to countries that want to kill us” and by making the economy larger. But the program has a $10.7 trillion shortfall (measured in net present value): Cutting waste and foreign aid won’t get you even a significant fraction of the way to closing it.
And even if we take a leap of faith on the economic impact of a Trump presidency, it wouldn’t close the gap either. Higher growth means higher wages, and benefit levels automatically rise after wages do. We want higher wages, of course, but they’re not a substitute for getting the program’s promises and resources into balance.
Trump is right that Social Security and Medicare are popular, and that Republicans seeking to make the programs solvent and otherwise reform them need to be careful. But they already know that, and they have been careful. Republicans aren’t for cutting Social Security benefits from their current level; they’re for reducing the growth of benefits. Ryan’s Medicare proposal leaves current retirees and near-retirees untouched, and guarantees future retirees comprehensive benefits equal in value to those Medicare now provides at no higher out-of-pocket cost than current law. Ryan and the Congressional Budget Office believe that increased competition would actually reduce out-of-pocket costs and generate savings for the government.
The evidence that being associated with changes of this kind have hurt Republicans is weak. Republicans put Ryan, Mr. Medicare reform, on the ticket in 2012, and did better among senior citizens than they had in the previous election. (They actually made disproportionate gains among older voters.) The evidence that opposition to entitlement reform has played a significant role in fueling Trump’s rise is also weak. It has been so rarely discussed in the campaign that exit pollsters have not even asked about it.
The real-world alternative to changes that rein in the growth of spending on old-age entitlements is a broad-based tax increase. Raising taxes on the rich won’t yield enough money. So while the political risks of standing for entitlement reform are real, they have to be compared against those of raising taxes on the middle class. It’s hard to see Trump voters being enthusiastic about that idea. That’s the inescapable trade-off: We can either raise middle-class taxes to keep middle-class benefit levels rising, or we can rein in the growth of those benefits to keep those taxes down.
None of this means Republicans should just keep doing what they’re doing on entitlements. Some Republicans have talked about raising the full retirement age: That’s neither necessary nor sufficient to make the program solvent, and it’s unpopular. They should abandon that idea.
Andrew Biggs, a resident scholar at the American Enterprise Institute (where I am a visiting fellow), makes a strong case for moving toward a new system. Young workers would be guaranteed a flat Social Security benefit when they retire that would keep them out of poverty -- something the program does not currently do. People would be able to supplement that benefit by saving money in tax-advantaged retirement accounts. Even with the new poverty benefit, that system would save enough money to be solvent: The government would no longer have to keep increasing retirement benefits for the affluent. And people with the ability to save would have an increased incentive to do so, helping the economy overall.
When it comes to Medicare, Republicans could stand to be a little bolder. When Ryan came out with his initial reform plan, it delayed implementation to leave current retirees and near-retirees alone. Since then, he has tweaked the reform in a way that protect beneficiaries from any exposure to increased out-of-pocket costs. So why not carry out the reform faster?
Fundamentally, though, the options for Republicans are the same as they have always been. Standing for entitlement reform isn’t going to win elections for them, but it’s still their least bad option—and Trump’s success in the primaries has done nothing to change that.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Ramesh Ponnuru at email@example.com
To contact the editor responsible for this story:
Katy Roberts at firstname.lastname@example.org