Bush’s Social Security plan like Christie’s, not like FDR’s

Republican presidential candidate Jeb Bush announced an entitlement reform proposal on Tuesday intended to stabilize Medicare and Social Security programs.

In terms of Social Security, Bush’s plan is not new. In fact, it largely replicates the plan offered by Chris Christie last April. Both plans incorporate a new COLA formula that embraces Chain-CPI, increase retirement age, and target the benefits of the “wealthy.”  Each proposal provides hand-outs to existing seniors that come directly from future seniors. 

{mosads}The Bush campaign stressed that current retirees or those near retirement won’t see a cut to their benefits. Likewise Christie assured seniors that his proposal would not impact current retirees. So the point isn’t as much to fix Social Security as it is to allocate its brokenness to non-voters. (See “Kicking the can on Social Security.”)

Both plans would allow the retirement age of today’s teen-ager to rise to roughly 70. This change asks our kids to contribute four additional years in order to collect benefits over a shorter period of time. Yes, the projected life prospects of a 70 year-old in 2060 are less than a retiree today.  (See “Retirement Age Isn’t The Problem.”)

One reason that our kids will need to work until 70 is so that these plans can end payroll taxes on retirees.  This is effectively a 6.2 percent raise for every working senior. The lost revenue is very expensive for Social Security because the benefit formula sees this revenue in many cases as free cash to the system.

While both of the candidates expound upon honesty and continuing FDR’s vision, it seems that neither actually have read what that president said. “We must not allow this type of insurance to become a dole through the mingling of insurance and relief. It is not charity. It must be financed by contributions, not taxes.”

These proposals do not promote FDR’s expectations for Social Security. In 1941 he said that we put in those contributions to give workers “a legal, moral, and political right to benefits.”  President Roosevelt did not want politicians like Jeb Bush or Chris Christie deciding who did and who did not deserve benefits. These changes explicitly end every hope held for the system by FDR, and open the door for the damn politician that he feared.

There are differences between these proposals. While both plans target the wealthy, they measure wealth in different ways.  The Christie plan defines wealth by what you currently earn or what you currently have.  The Bush proposal uses what someone earned during their working years to select those who deserve benefit cuts. These are not the same thing.

Christie’s plan phases-out benefits starting with people who make more than $80,000.  Bush’s plan only lowers what these people can collect. He also promises that his change will be phased in over ‘gradually over decades to give workers time to plan.’ The math here is simple, for the Bush approach to deliver the results promised by Christie, the threshold of those affected will have to be significantly lower than $80,000.

The Committee for a Responsible Federal Budget(“CRFB”) analyzed both plans (Christie, Bush)  The research suggests that the Bush plan will deliver significantly larger savings from the wealthy. This rule is going to hit people who make a lot less than $80,000 if it hopes to achieve the promoted results.

In terms of Bush’s proposal, someone who earns roughly $3,333 a month or $40,000 per year is wealthy.  Once the changes are fully implemented, this worker would get about a 17 percent reduction in benefit levels, those benefit levels would grow more slowly, and the worker should expect to collect for few years. In exchange, today’s retiree gets a raise.

Whether it is Christie or Bush, the basic plan is to give a pass to the politics of the third rail.  They want to reward those voters who have ignored the problem the longest at the expense of those who have no vote today. These plans work provided that our kids are more willing to pay taxes than we are.

Smith is the founder of “Fix Social Security Now” which provides information on all alternatives in the public debate on Social Security through its site www.FixSSNow.Org.