Well, this is curious. Part of the Republican brand, I thought, was that the GOP was the party of debt reduction and the need to reform entitlements. Paul Ryan made his name as a policy wonk because of his support for Medicare reform. And recall that President Bush unsuccessfully pushed for Social Security reform. Then I read this from the WaPo’s ace policy reporter Lori Montgomery:
Cutting federal health and retirement spending has long been at the top of the GOP agenda. But with Republicans in striking distance of winning the Senate, they are suddenly blasting the idea of trimming Social Security benefits. … But what has drawn attention – and charges of hypocrisy – is the decision by Republican groups to attack Democrats for supporting conservative ideas in a proposed “grand bargain” on the budget drafted by Democrat Erskine Bowles and former Republican senator Alan K. Simpson of Wyoming. … Republicans would raise taxes, the theory goes, in exchange for Democrats cutting health and retirement spending. Among its proposals: trim Social Security benefits for well-off seniors, raise the retirement age to 69 by 2075 and adopt the new inflation measure, known as the chained Consumer Price Index, or chained CPI.
Shorter: The GOP is bailing on these supposedly commonsense, bipartisan reforms because older voters dominate in midterm elections, and Republicans see an opportunity to slam Dems for supporting changes seniors might not like. That’s the gist of the WaPo story. A few thoughts:
1.) From a policy standpoint, raising the retirement age makes sense given the rise in life expectancy and improvement in health and working conditions. AEI’s Andrew Biggs has suggested gradually increasing the early retirement age from 62 to 65 for workers retiring in the 2030s. But this is key: The best reason to prevent early retirement claims is not to slash benefits but rather to delay and thus increase them for when individuals are older and need them more. Early retirement incurs a 25% benefit reduction. And as Biggs also wrote:
“It is inevitable that Social Security, Medicare, and other government programs will become less generous toward the rich than they are today. The only alternative is ever-increasing taxes and their toll on personal welfare, individual freedom, and economic growth.
2.) One other policy note: Republicans are correct in rejecting the chained CPI fix. Again, here is Biggs:
… However, the chained CPI is the wrong measure for Social Security benefits and the income tax code. A better measure for Social Security would be a chain weighted version of the CPI-E, which measures price changes for individuals over 65. This probably would still show lower inflation than the current CPI, by around 0.1 percentage point annually, but would be superior to the current CPI-W, the chained CPI, or the CPI-E on its own (which tends to show higher inflation).
The chained CPI is also inappropriate for use in the tax code. By lowering adjustments to the tax brackets, over time it would make more of individuals’ earnings subject to higher tax rates, an effect known as “bracket creep.” Even using the current CPI, and assuming that the Bush tax cuts were made permanent, average tax rates and tax revenues relative to the economy would soon rise to record levels, according to the Congressional Budget Office (CBO). Applying the chained CPI to the tax code would only speed up this effect.
3.) Last year, the Wall Street Journal’s Holman Jenkins wrote a great piece on how the Affordable Care Act would change how Republicans and conservatives argue about entitlements and welfare. They will draw a line, Holman writes, between “earned” entitlements such as Medicare and Social Security vs. “unearned” welfare such as Obamacare subsidies, Medicaid, and food stamps. Jenkins:
Tea-party activists have good reason to suspect their stand will pay electoral dividends in the months and years ahead. Not appreciated is the powerful new meme Mr. Obama has handed them, which will transform entitlement politics in our country. The new “conservative” position will be to defend Social Security and Medicare, those middle-class rewards for a life of hard work and tax-paying, against Mr. Obama’s vast expansion of the means-tested welfare state for working-age Americans. … Look for means testing possibly even to evolve into a new pejorative in Republican mouths, suggesting undeserved benefits for groups that mostly vote Democrat.
Unfortunately for this tactic — which may be what’s happening right now – you cannot solve realistically America’s long-term debt problem without entitlement reform. And given the evolving nature of the US economy, we may need more expansive supports for lower-income Americans, like an expanded Earned Income Tax Credit. Differentiating between good (deserved) vs. bad (undeserved) safety net spending might be an effective political approach, but it would make for poor policy.
Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.