McCain's Stance on Social Security

FactCheck.org has challenged Obama's campaign over his depiction of McCain's Social Security plan. And I think that they're right, that if Obama's campaign is referring to the "Bush-McCain privatization plan", that it's fair to look at the terms of Bush's 2005 privatization plan and criticize the Obama campaign's exaggerations and distortions.

But what are we to make of the void?

While McCain has voted in favor creating private Social Security accounts in the past, and endorsed Bush's 2005 proposal (which never came to a vote in Congress), he is not making a strong push for them as part of his campaign. In fact, a search for the term "Social Security" on the McCain-Palin Web site brings up the following: "No documents were found."

That's true - except it's misleading, as the problem is with McCain's search algorithm. Compare Google's search results.

But they're still mostly right - John McCain's statements on Social Security are sparse and hollow. For example,

Reform Social Security: John McCain will fight to save the future of Social Security and believes that we may meet our obligations to the retirees of today and the future without raising taxes. John McCain supports supplementing the current Social Security system with personal accounts -- but not as a substitute for addressing benefit promises that cannot be kept. John McCain will reach across the aisle, but if the Democrats do not act, he will. No problem is in more need of honesty than the looming financial challenges of entitlement programs. Americans have the right to know the truth and John McCain will not leave office without fixing the problems that threatens our future prosperity and power.

So apparently John McCain will work to "meet our obligations to the retirees of today and the future" except for those "promises that cannot be kept"? That's awfully nebulous. Is there a more coherent statement of McCain's plan?

Politicians refuse to talk straight about Social Security and Medicare: the current Social Security system is unsustainable. Period. A half century ago, sixteen American workers supported every retiree. Today, it's just three. Soon, it will be only two. If we don't make some tough choices, Social Security and Medicare either won't be there for our children and grandchildren or we will have had to raise taxes so dramatically to support them that we will crush the prosperity of average Americans.

Okay, this must be what we're all looking for. So on to the "straight talk":

I will fight to save the future of Social Security and Medicare by reaching my hand across the aisle, but if the Democrats won't act, give me the responsibility and I will. If Congress won't act, I will demand an up or down vote on my plan. No problem is in more need of honesty than the looming insolvency of our entitlement programs. No government program is the object of more political posturing and spin than Social Security and Medicare. Americans have the right to know the truth, no matter how bad it is. I won't leave office without doing everything I can to fix the fiscal problem that, more than any other, threatens our future prosperity and power.

So his "straight talk" is that he'll "reach across the aisle" to demand of Congress a plan he deems acceptable. (Apparently we have to read his mind to know what would be acceptable.) If they don't, he'll offer a "take it or leave it" plan, and if they say, "Thanks, but we'll leave it," he'll ask that they vote on his plan anyway. Whatever his plan happens to be. And since we have "the right to know the truth" about his plan, "no matter how bad it is", he's going to keep every detail of his plan secret.

Wonderful.

Just like his secret plan to capture Bin Laden.

There's plenty of room to savage McCain on the Social Security issue without exaggerating. "McCain says that some of our Social Security benefit promises cannot be kept. But he won't tell us which promises aren't worth keeping, or whether he intends to break the promises made to retirees who rely on Social Security to make ends meet. McCain has promised us 'straight talk' on Social Security, but he doesn't deliver. Is that another of the promises he doesn't plan to keep?"

Discouraging Candidates From Presenting "Tough Choices"

Anybody who reads the Washington Post's editorials knows that they're a huge advocate of Social Security reform, approaching the subject like Chicken Little - they'll run pretty much any piece about how the entire system is about to collapse on our heads. And Post readers also know that their unsigned editorials often appear to be unsigned because nobody with any sense of self-respect would want to attach their name to the piece.

Today, we get a twofer. Commencing with a whine about how candidates aren't willing to talk about fixing Social Security during a presidential election campaign, the Post devotes a paragraph to McCain's plan - or lack thereof. How he made a "no new taxes" pledge, followed by stating in specific relation to a possible payroll tax increase, "There is nothing I would take off the table," followed by a full retreat through a spokesperson:

"There is no imaginable circumstance where John McCain would raise payroll taxes," said spokesman Tucker Bounds. "It's absolutely out of the question." Except that it might not be. "Sen. McCain believes you can solve Social Security without raising taxes, but he also believes you can't start a negotiation with an ultimatum," said spokesman Taylor Griffin.

So what does the Post have to say about McCain's flip-flops on taxes, his complete lack of ideas, and his belief that you can fix deficits of all sorts with magic without raising taxes? Absolutely nothing.

Then then move to Obama, who actually has proposed measures to improve the future of Social Security. Yes, he's committed to increasing payroll taxes, but the tax won't be put into effect until the date of a projected shortfall between what Social Security takes in and what it pays out. Oh, the horror. The Post whines,

But surely President Obama could find some way to bring in money sooner without letting Congress fritter it away on other needs.

So they want Obama to start talking about... a Social Security lockbox? Right....

The Post then expresses that the additional Social Security taxes Obama would impose on the wealthiest taxpayers would be modest, describing that choice as "only sensible". They then complain that if imposed on all income as opposed to earned income it would be too high. Then they complain that even if the new tax is too high, it needs to be higher. No, wait, let's read between the lines: They're complaining that taxes also need to be raised on the middle class, but aren't honest enough to say that directly. Incredibly, they then offer these rhetorical questions:

So does Mr. Obama get credit for being brave - or foolhardy - enough to put out a tax proposal that is sure to be used against him? Does he get demerits for failing to be more specific, and more honest, about what will be required?

If you took the Post at face value, Obama would get credit for being brave. But if you read the Post's analysis, McCain gets kid gloves treatment for flip-flopping on payroll taxes and pretending that all budget woes can be fixed without tax increases. (If the author of this piece were more honest he might have noted that McCain's claiming to be able to do this while promising additional tax cuts.) Obama gets savaged for proposing a tax increase the Post deems inadequate.

Meanwhile, beyond the Post's lack of candor in relation to the new taxes it wants to impose on the middle class, the Post lacks the courage to share any specifics of what it believes to be necessary. The Post wants higher taxes? Who will pay them? What tax rates does it advocate? How will the "lockbox" work? The Post wants the new taxes to be implemented soon. When?

Or does it turn out, sadly, that the "textbook Washington campaign" he derided Clinton for running, in which "you don't present tough choices directly to the American people for fear that your answers might not be popular, you might make yourself a target for Republicans in the general election," has something to recommend it after all.

Republicans, nothing. If the Post's conduct is any indication, proposing any sort of tough choice makes you a target for mendacious unsigned editorials.

Social Security Taxes

Obama's latest proposal:

Democrat Barack Obama said Friday he would apply the Social Security payroll tax to annual incomes above $250,000, which would affect the wealthiest 3 percent of Americans.

I've said it before and I'll say it again: it's dangerous to the future of Social Security to transform it from a system where your benefits correlate to your contributions, to one in which the wealthy (and, let's be honest, many of the most influential) citizens are asked to pay in significant disproportion to the benefits they will receive. Obama may believe that a "donut hole" tax plan won't endanger Social Security, but I suspect otherwise.

Be Careful With That Tax Cap....

Perhaps its understandable that Obama remains fixated on fixing the Social Security "crisis" despite far more pressing concerns for our economy (such as Medicare/Medicaid costs), as it appears to be a media obsession. But the "solution" of a substantial increase in the cap is not a good one.

Let's remember that it's not only taxes that are capped, but also benefits. There's an essential deal with the upper middle class and wealthy - they continue to participate in the Social Security program at a level not substantially disproportionate to the benefits you will eventually receive, with their tax contributions propping up the entire system. At the other end, when the U.S. Treasury has to "buy back" the bonds that constitute the Social Security trust fund, it is difficult to imagine how income taxes won't have to be raised, and the wealthy will also bear the brunt of any tax increase. (Either that, or we further explode the deficit to pay back the money owed to the trust fund.)

If you significantly change that balance, such that Social Security goes from being an acceptable deal to being a raw deal in the eyes of higher income earners, you create an incentive for them to walk away from the system. And although we like to pretend otherwise, these are the people who have the ear of Congress. They're also the group that, on the whole, prefers that the "crisis" be fixed through such measures as reducing benefits to early retirees and raising the retirement age.

Raising the cap will also likely inspire more small businesspeople to incorporate, draw a salary below the cap, and pay themselves additional "profits" free of "self-employment" taxes.

Defunding Social Security As An Election Strategy

Okay, I understand why Novak is arguing that we should slash FICA taxes and tell younger workers, "In return for your reduced tax burden you will get little to nothing from Social Security when you retire." Demolishing Social Security fits with his world view. But what I can't understand is why he believes McCain should make that part of his platform. I grant that McCain has been promising to cut pretty much every tax under the sun, but even he would probably recognize that "this one is different".

Novak has a hard time keeping his lines straight. First, it's:

Moreover, Republicans talk about offsetting losses in payroll tax revenue by cutting future Social Security benefits, which contains seeds of electoral catastrophe.

This later becomes,

Even Republican advocates of cutting the payroll tax talk about offsetting it with reduced future benefits. That's a bargain young workers would buy in a minute, and current Social Security recipients would be assured that their pensions would not be reduced one penny.

The distinction, apparently, is that you hammer the theme, "Younger workers, you're not going to get Social Security anyway, so let's reduce your taxes and phase it out," reassuring current recipients, "You're still going to get every cent of what was promised to you," and telling everybody else... er, Novak left that part out. Yet that block of "everybody else" is an important group to address, as putting their future benefits at risk "contains seeds of electoral catastrophe".

The perceived need to offset losses in payroll tax revenue stems from a belief that the Social Security trust fund must be replenished. The truth is that there is no such fund, and the heavy payroll tax revenue resulting from the Greenspan Commission's 1983 "reform" not only provides enough money for Social Security but funds other programs, as well.

Wow. So in Novak's mind, Social Security is so "rich" that even if we pretend that the treasury notes comprising its "trust fund" are worthless, it can continue to pay not only for itself but for a host of other programs. And it could thus pay for itself even after a tax cut. What a compelling case for a "reform" that slashes benefits.

McCain says that he doesn't really understand economics. Novak appears to either be in the same club, or to be trying to take advantage of McCain's weaknesses. Either way, taking Novak's advice seems like a surefire way for McCain to blow a hole in his own foot.