One of the disappointments of the budget showdown a few years ago was the collapse of the Grand Bargain — the potential of putting Social Security on “chained CPI” in exchange for tax hikes. It would have potentially sliced trillions of dollars from future Social Security obligations.
Well, Obama has now changed course and embraced one of the dumbest ideas yet to emerge from the Democratic mind: expanding Social Security.
President Barack Obama on Wednesday called for an increase in Social Security benefits for the elderly as he hit the road with a speech that previewed his role as campaigner-in-chief for Democrats ahead of the November election.
The president’s comments mark a reversal after he sought a bipartisan deal five years ago that would have cut Social Security and moves the Democratic party toward a unified stance on the nation’s cornerstone retirement program.
“It is time we finally made Social Security more generous and increase the benefits so that today’s retirees and future generations get the dignified retirement that they have earned,” Obama said in Elkhart, Indiana, during a speech in which he spoke against Republican economic policies.
Obama has no specific proposal in mind for a benefits increase, said a White House official who asked for anonymity. Obama didn’t say in his speech how much he wants to raise benefit levels or offer a timetable.
With the shift, the president joins likely Democratic presidential nominee Hillary Clinton, who embraced the idea of expanding Social Security earlier this year, and her challenger, Vermont Senator Bernie Sanders, a longtime champion of expanding the program. Obama’s remarks nudge the party toward a more liberal agenda and represent a nod to Sanders and his supporters.
Social Security is already losing money. There’s a “trust fund” but that trust fund consists entirely of IOU’s — the money will have to come out of general revenues. Even with the fiction of the trust fund, the program has $10 trillion in unfunded liabilities over the next 70 years.
As always, they want to pay for this by raising the cap on Social Security taxes. We’ve discussed this before: this would produce an enormous marginal tax rate for the wealthy — 50% for the Feds alone. And raising the earnings cap doesn’t solve the problem. The reason Social Security taxes are capped is because benefits are. If you tax Bill Gates on all his income, you have to raise his benefits too. Without statutory change, you’ve made Social Security’s finances worse, not better.
And all of this to benefit the wealthiest demographic in America. The 65-74 year age group has the most net wealth in the United States. The 75+ age group has the second highest. This isn’t a conspiracy: wealth builds over a lifetime and usually peaks at retirement. Social Security was intended to prevent seniors from living in poverty, not to be their primary source of retirement income. But seniors vote like hell and the Democrats are nothing if not panderers.
The good news is that this is going nowhere. Democrats are on board but the Republicans can easily block it. And their courage will likely falter when Americans realize the tax hikes and program changes necessary to make this “work”. But it’s a sign of just how far Left this party has moved: Barack Obama has discovered that he’s too conservative for the base.