If GOP retakes Congress, get ready for populism. Like Social Security benefit cuts
Despite the recent populist hand-waving, indications are that if the GOP regains Congress, which seems likely, it will return to an age-old elitist priority: cutting benefits for old people.
The Republican Study Committee recently released a document outlining the plans, and The New York Times reported that there are discussions about again leveraging the debt ceiling to try to gain concessions. So back to the “cut benefits for the elderly or we will nuke the economy” dynamic that became so familiar during Obama’s second term.
The story they will tell about why benefits have to be cut seems to make sense. People did not use to live as long, so it made sense to retire at 67, they will say. But now life expectancy is higher, and people are healthy for longer, so it makes sense for them to retire later.
They will say, this is what we have to do to save Social Security, a program we all love.
But this story, like most stories politicians tell, is designed to hide the truth, not reveal it. The truth is that raising the retirement age does nothing about when people retire. It just cuts benefits for everyone.
As Matt Bruenig of the People’s Policy Project recently wrote: “Social Security does not have one retirement age. It has 96 retirement ages, one for each month between age 62 and 70. What people call the ‘full retirement age’ (FRA) is just a placeholder in a formula that determines the benefit level at all 96 retirement ages.”
Raising the retirement age by three years, as several GOP leaders have signaled is their intention, won’t make people work for three more years. It will simply cut Social Security benefits by roughly one-fifth.
Bruenig’s chart above shows exactly what would happen. Raise the retirement age by any amount and you simply get less in benefits no matter when you retire.
So for the average Social Security beneficiary with a long history of working, someone who receives around $20,000 a year to live on, this means taking about $4,000 out of their pockets each year.
The real problem with Social Security benefits is that they are far too low. You just can’t live on Social Security, though that’s all many people have to fall back on.
Social Security payroll taxes are only charged the first $147,000 of a person’s income. That tax cap means the effective tax rate on someone who makes $300,000 a year is about half of the tax rate for someone who makes $150,000 a year or less. The tax rate for someone who makes $1 million in a year is minuscule, since they contribute the same dollar amount as someone who makes $150,000.
But if you get rid of that tax cap, it becomes a flat tax and everyone pays the same rate. Doing this is estimated to eliminate about three-quarters of the long-term Social Security shortfall.
So if they want to save Social Security, they can do it. Just make millionaires pay the same rate as people on minimum wage. It’s unlikely they’ll propose that, however, since millionaires are the ones who fund their campaigns — which in Rep. Russ Fulcher’s case means paying his daughter’s salary.
The story is similar in the case of Medicare, where the Republican Study Committee recommends measures like raising the age of eligibility and requiring higher premiums. How about allowing Medicare, the largest bulk purchaser of pharmaceuticals in the world, to negotiate drug prices?
Well, we already know how that goes. Sen. Mike Crapo went out of his way to oppose such measures as “price controls,” shortly after cashing some whopping checks from big pharma.
The debt ceiling will need to be raised sometime next year to avoid defaulting on the debt. If you value the ability of seniors to obtain food and medicine, now’s the time to get prepared for the debate that will be coming.