Is Hillary Clinton Still Against Lifting the Cap on Income Subject to Social Security Tax? (Hope So)
Hillary Clinton is on her listening tour to figure out how to fill out her 2016 platform (as Reason's Scott Shackford noted, her campaign's issue page is not just spotty but missing altogether). Because lord knows that 30-plus years in the public eye and having the last couple of years off just couldn't have given her enough time to prepare anything other than a cameo in her own annoucement video.
One of the first things I'd like to hear about from Candidate Clinton is whether she still believes that lifting the cap on income subject to Social Security taxes is a bad idea—"a trillion-dollar tax hike" she called it back in 2007 while running for the Democratic nomination. Here she is talking to New Hampshire editorial boards back in November 2007. The comments about raising the income level subject to tax comes in around 3.30 minutes.
Currently only about $118,000 of income is subect to 12.4 percent in payroll taxes (split between employer and employee) to pay for Social Security, which is in even worse shape now than eight years ago. The major Social Security trust fund, which pays for retirement, will have run out of surplus funds built up over the past decades around 2034. By law, Social Security is only be allowed to pay out what it takes in via dedicated payroll taxes and the trustees of the program say that when the surplus vanishes, benefits will be cut by 25 percernt or more. (The surplus in the Social Security trust fund that pays for disability will be gone within a couple of years.)
Yet a number of high-profile Democrats, notably Sen. Elizabeth Warren of Massachusetts and former Maryland Gov. Martin O'Malley, are rallying around the idea of expanding Social Security benefits. It turns out that even lifting the cap on income levels won't save the program fiscally. As the centrist think tank Third Way noted in 2013:
In 2030, a typical couple reaching the eligibility age of 65 will have paid $180,000 in lifetime Medicare taxes but will get back $664,000 in benefits. Given that this disparity will be completely unaffordable, Sen. Warren and her acolytes are irresponsibly pushing off budget decisions that will guarantee huge benefit cuts and further tax hikes for Gen Xers and Millennials in a few decades.
In a way, you have to hand it to economic populists. When faced with a program that has gotten more and more insolvent and unsustainable, they're willing to double down and essentially just say fuck it, let's party til we're dead (most economic populists talking up expanding Social Security are closer to the grave then the crib). Recall that these folks—along with a ton of Republicans whose fiscal looseness is stamped on every F-35 and Medicare expansion they've voted for—cried bloody murder when Barack Obama proposed tying increases in benefits to the cost of things rather than wage inflation.
So, does Hillary Clinton still think a "trillion-dollar tax hike" is a bad idea? Certainly, adding a 12.4 percent tax on every dollar of earned income over $118,000 will have a dampening effect on all sorts of things, if only because it gets sucked out of people's hands and into the government bureaucracy.
My dream candidate would openly push for an end to entitlements based on age, a category that no longer predicts anything about finances other than a positive situation. If we want to provide a social safety net, let's have that debate and focus on the truly needy among us, not retirees who are living longer and richer on average than ever before. I realize that's probably a bridge too far for any major-party candidate to blow up, but we'll get there sooner or later whether we want to or not. There's simply no way to sustain old-age benefits the way we have since 1935.
Social Security was passed in the thick of the Great Depression and we live in a very different world, one in which relatively young and relatively poor people are paying for benefits that go to relatively old and relatively wealthy people (recall too that Obamacare is predicated upon forcing young healthy people to subsidize the insurance premiums of older sicker people).
That's not just fiscally dumb, it's generational warfare in which the baby boomers, who once so famously rebeled against their parents, are now sticking it to their own kids and grandkids.
One of Hillary Clinton's talking points these days is that becoming a grandmother has given her a whole new perspective on the world. Her granddaughter will do just fine, I'm sure, given the immense wealth that Bill and Hillary have amassed over the past decade-plus. But I'd sure like to know what she thinks about the grandkids of the rest of us.