Sunday, May 18, 2008

Wash Post: Obama Knocks McCain on Social Security

From the Post's On the Trail blog:

GRESHAM, Ore. Sen. Barack Obama came to a senior citizens center here to discuss the squeeze faced by middle-class retirees and reiterate his longstanding proposal to eliminate income taxes for any senior making less than $50,000 per year.

The proposal came as the Illinois senator continued to focus his intentions not on Sen. Hillary Rodham Clinton, his rival in a Democratic primary contest in Oregon Tuesday, but instead on Republican Sen. John McCain.

Obama has spent the past week seeking to tie McCain to President Bush and foregrounding the differences between Obama's views and McCain's on a range of issues, including foreign policy, rural and farm issues, manufacturing jobs, energy reform and health care.

In an hour-long forum with about 50 seniors, Obama turned his attention to the financial pressures facing those in retirement, which he said is something people are "most worried about."

"That American dream feels like it's slipping away," he said.

The senator laid out a plan to "adjust the cap on the payroll tax so that people like me pay a little bit more and people in need are protected. That way we can extend the promise of Social Security without shifting the burden onto seniors." He said the plan would include "a donut hole" to make sure that the change did not "ensnare" middle class Americans.

He also suggested eliminating income taxes for any retiree making less than $50,000 per year.

Obama said his approach differed sharply from that of McCain, who "has already said that he supports private accounts for Social Security -- in his words, 'along the lines that President Bush proposed.'"

"Let me be clear: privatizing Social Security was a bad idea when George W. Bush proposed it. It's a bad idea today. It would cost a trillion dollars to implement at the front end, and would put the retirement plans of millions of Americans at risk on a volatile Wall Street," Obama said. "That's why I stood up against this plan in the Senate, and that's why I won't stand for it as president."

Tucker Bounds, a McCain spokesman, responded to Obama's Oregon remarks this afternoon, saying "Barack Obama's response to our slowing economy is to raise taxes on job creating investment. His response to high gas prices is to raise taxes on oil."

"With his lack of experience, it should be no surprise that Barack Obama's response to the problems facing Social Security is to raise Social Security taxes, while making mis-informed partisan attacks," Bounds said. "His proposal for billions upon billions in tax increases on Social Security is just another example of his weak economic judgment. John McCain has been clear about his belief that we must fix Social Security for future generations and keep our promise to today's retirees, but raising taxes should not be the answer to every problem."
Not much of substance to add here, except a couple quick points:
  • First, Obama's plan -- even excepting the reduction in income taxes on retirement benefits -- wouldn't come close to saving Social Security. He's still further along than McCain, who hasn't endorsed anything specific yet, though he has stated he'd focus on holding back on benefit growth;
  • Second, the question of whether to have personal accounts isn't related to solvency. Rather, it's about how to spread the costs of solvency over time -- accounts, if properly structured, can set aside money today to ease burdens on future generations -- and the costs and benefits of allowing low-income workers to diversify their retirement portfolio to include stocks and bonds.



This is Constitution Party presidential nominee Chuck Baldwin’s stance on SS:
The Constitution grants no authority to the federal government to administrate a Social Security system. The Constitution Party advocates phasing out the entire Social Security program, while continuing to meet the obligations already incurred under the system. Until the current Social Security system can be responsibly phased out, we propose that:
• The Social Security tax is not a "rainy day" fund which politicians can pirate, or from which they can borrow to cover their errors and pay for their excesses.
• Individuals who have contributed to Social Security be allowed to withdraw those funds and transfer them into an IRA or similar investments under the control of the individual contributor.
• Any sort of merger between the U.S. Social Security System and that of any foreign country must be banned, so the distribution of benefits will not go to persons who have not qualified for payments under American law as legal residents.
• Earning limitations on persons aged 62 and over be removed, so that they may earn any amount of additional income without placing their benefits at risk.
• Those provisions of the Social Security system which penalize those born during the "notch years" between 1917 and 1926 be repealed, and that such persons be placed on the same benefit schedules as all other beneficiaries.
We support the right of individuals to choose between private retirement and pension programs, either at their place of employment or independently.
We need to continue to reign in this out of control government and neither McCain or Obama are willing to do this!

Bruce Webb said...

Well you can make a good case that the 'Promote the General Welfare' clause in the preamble and the specific grant to Congress in Article II Sec 8
"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;" would cover this quite neatly.

The notion common among Constitutionalists and Austrians that if it isn't explicitly spelled out in the Constitution it is not Constitutional is belied somewhat by the fact that the Constitution is not a particularly explicit document. It sets out some 'shalls' and some 'shall nots' but in between leaves some extraordinary latitude for Congress to act.

If Congress in 1935 concluded that Social Security would serve to 'provide for the general Welfare' I see nothing in the actual text of the Constitution that would prevent that. Article II Section 9 'Limits on Congress' is narrowly crafted and nothing I see applies. Sometimes people seem to be working out of a Constitutional text existing only in their minds.

Bruce Webb said...

Actually that is Article I Sec 8 & 9.
And I found it interesting that Andrew admits that private accounts have little to do with solvency per se and more to do with intergenerational equity. The conceptual problem I see is that Social Security could directly capture whatever gain there was from moving away from Special Treasuries, there is no structural need to put those in individualized accounts.

Social Security 'crisis' was sold on the existence of some gap at some future time, with the magnitude of the gap and the timing not always set up with the clarity needed for good decision making. Any plan that would be compelling to low-income workers would have to include a component showing a better result at the same or lower cost. Both Posen and LMS fail on this measure. Neither delivers inheritability, neither really gives individuals meaningful control over the specific investments (though LMS is a little vague on this point), and neither delivers a better financial result for this category of workers than a much smaller fix through a straight payroll tax increase would.

In context a hard sell for low-income workers.