What the Dem’s Plan for Social Security Means for Your Retirement
Dear Rich Lifer,
For the last couple of days, we’ve been taking a closer look at how various Democratic candidates would deal with Social Security.
So far the big takeaways are that both Bernie Sanders and Elizabeth Warren would look to (temporarily) shore up the program and also immediately expand benefits being paid out to various groups of Americans. In both cases, the funding would come from additional taxes on people making at least $250,000 a year.
Meanwhile, Pete Buttigieg’s website offers the following:
“Despite what many Republicans erroneously claim, Social Security is not facing imminent insolvency. But Social Security does face a fiscal imbalance that needs to be addressed — without raising taxes on working- and middle-class Americans. At the same time, we must do more to ensure that Social Security provides sufficient economic security for the financially vulnerable and for those still left out of the program, like caregivers.”
Like Warren and Sanders, Buttitgieg wants to shore up Social Security by targeting Americans earning $250,000 or more.
In a white paper on retirement, he says his plan will
“Draw high earners more fully into the Social Security compact. Individual wage earnings above $250,000 (which means family wage earnings above $500,000 for equal-earning couples) will face additional Social Security taxes and earn modest Social Security benefits for their extra contributions.”
Unlike Warren and Sanders, however, Buttitgieg also wants to create a process that will automatically continue to raise taxes on high earners so that Social Security remains in a permanent state of solvency.
I think we should talk about the idea of caregiver coverage in a completely separate article.
Bring on the Biden Vs. Bernie Fight
Okay, that brings us to Joe Biden.
In the wake of the most recent debate, a major spat between the Sanders and Biden camps developed around the idea that Biden has consistently supported Social Security cuts.
I’ll let none other than The New York Times’ Paul Krugman explain what all the fuss is about:
“In 2018 Biden gave a speech attacking Paul Ryan, the then-speaker of the House, for wanting to cut taxes on the rich and pay for those tax cuts by cutting Social Security and Medicare. There was nothing in his remarks that should bother progressives.
“However, a Sanders adviser recently circulated a snippet from the video of the event that made it appear that Biden was actually supporting Ryan’s position and calling for Social Security cuts. A few days later a newsletter from the Sanders campaign quoted Biden out of context and made the same claim…
“Biden did make a misstep in his counterattack, mislabeling the misrepresented video clip as ‘doctored,’ but that doesn’t mean he’s not still due an abject apology. Instead, however, the Sanders campaign has doubled down. Rather than admitting that it smeared a rival, the campaign is going around claiming that Biden has a long record of trying to cut Social Security. There is, unfortunately, some truth in that claim — but it doesn’t excuse either the original lie or the refusal to admit error.
“So, about the element of truth in the criticism of Biden: Once upon a time, there was a peculiar consensus among media figures and would-be centrists that the long-run cost of entitlement programs was America’s biggest problem, that Social Security in particular was in crisis and that something had to be done, with the solution including benefit cuts.
“This consensus wasn’t based on hard thinking; it was about the attitude politicians were expected to display. As I wrote way back in 2007, proclaiming a Social Security crisis requiring cuts was seen as a ‘badge of seriousness,’ a way of showing how statesmanlike and tough-minded you were.”
See, for most of his career, Biden has been a deficit hawk and a pragmatic politician looking to make compromises. As a recent Slate article explains it:
“There’s no getting around the fact that Biden spent the vast majority of his time in Washington beating the drum for budget cuts. Was he just a product of his times? Sort of. Biden joined the Senate at a moment when New Deal liberalism was giving way to fiscal conservatism and skepticism about big government. After Ronald Reagan’s victory, plenty of Democrats tacked to the center on issues such as crime and spending, and over the coming decades, debt-panic and a grave willingness to ‘tackle entitlements’ slowly became the mark of supposedly serious Washington politicians.
“But Biden was especially energetic about it all. He began sponsoring bills designed to curb the budget in the late 1970s. In 1984, as deficits mounted thanks to Reagan’s tax cuts, Biden warned of looming economic catastrophe and co-sponsored legislation that would freeze all federal spending for a year, including Social Security.
“The idea flopped, but Biden still pushed similar spending pauses throughout the decade. He also backed a line-item veto, another favored fad among deficit hawks. In 1995, he chose to side with the new Republican majority in Congress and backed a balanced budget amendment to the constitution, warning that the national debt was threatening to consume the rest of the federal budget. ‘Unless this thing gets focused,’ he told The New York Times, ‘by the time we face the music, everything I care about is going to be gone.’ The amendment ultimately lost by a single vote in the Senate, because Democrats said that they were worried it would lead Congress to raid the Social Security Trust Fund in order to limit the deficit. Biden, along with other members of his party, had fought to tweak the amendment so that it would exclude the retirement program. But after that effort failed, he put his concerns aside and voted yay with the GOP anyway. When Republicans took a second doomed shot at the balanced budget amendment in 1997, he supported it again.”
Now, full disclosure:
Personally, I think we need more deficit hawks in Washington…
I would love to see a balanced budget amendment…
And at one point during his Vice Presidency, when Biden and I owned homes near each other, I bumped into him at the local coffee shop, looked right past his security detail, and said, “Hey, what’s up, dude?” (He nodded back.)
Of course, none of this matters now.
What Is Biden’s Plan?
Biden has since changed his tune, at least when it comes to Social Security.
“The Biden Plan will put the program on a path to long-term solvency by asking Americans with especially high wages to pay the same taxes on those earnings that middle-class families pay.”
Since there is no reference to a $250,000 threshold, it is even possible that Biden wants the payroll tax to apply to every dollar made by anyone, including families making between $130,000 and $250,000 a year.
Biden’s plan is different in other ways as well – especially in how he would have Social Security treat teachers and other public sector workers.
His plan also says “proposals to make the program ‘means-tested’ – so that only low-income retirees workers receive benefits – jeopardizes the program’s universal nature and key role as the bedrock of American retirement.
Too bad means testing is already happening. But like the caregiver topic, we’ll save the discussion for another day.
But the ultimate point is that not only do all the major Democratic candidates essentially support the idea of payroll tax hikes on wealthier Americans, Joe Biden may actually have the most aggressive approach of the bunch.
That’s something you’re not hearing from the mainstream media at all.
To a richer life,