Published May 26, 2015
Former Arkansas governor Mike Huckabee is setting out on a populist course in hopes of securing the Republican nomination for president in 2016. Among other things, he has come out against the next round of free-trade agreements. He also wants to be seen as the GOP defender of middle-class entitlement programs. In announcing his candidacy, he said, “If Congress wants to take away someone’s retirement, let them end their own congressional pensions — not your Social Security.”
Huckabee’s populism is music to the ears of some conservatives in Washington. They want the GOP to adjust its economic message going into 2016. They argue that the Republican nominee for president will need to do much better among working-class voters than 2012 nominee Mitt Romney, especially in the Midwest.
They are right about that, of course. But there’s got to be a better way to go about it than Huckabee-style populism.
Huckabee’s lines about Social Security were a not-so-subtle attack on the entitlement-reform proposals of New Jersey governor Chris Christie — who may also become a GOP presidential candidate. Christie has proposed a series of reforms in Social Security, Medicare, and Medicaid to lower their long-term costs. One of his reform ideas was to gradually phase in a new means test in Social Security for future entrants into the program. Eventually, single retirees with incomes (aside from Social Security) above $80,000 annually would have their Social Security benefits reduced. For couples, the starting point for the means test would be even higher. Individuals with incomes (again, aside from Social Security) above $200,000 annually would get no Social Security benefit. (Disclosure: I spoke with Governor Christie and some of his aides about entitlement programs and possible reform ideas before he announced his plan. Other health and Social Security experts did the same. But I am not an adviser to a possible Christie campaign for president.)
It’s always popular to defend Social Security. But there’s nothing in Huckabee’s attack that should be particularly appealing to working-class voters, because they wouldn’t be affected by Christie’s means-testing proposal. The only people who would lose any of their Social Security benefits would be those with very substantial incomes in retirement, almost certainly from investments and large retirement savings accounts. For a retired person, it takes a lot of assets to generate $80,000 in annuity payments annually, and a person has to be truly rich to have more than $200,000 in annual income while not working.
So the Christie means-testing proposal would represent a cut in benefits for those Americans who are doing very well, not the working class.
Huckabee punctuated his attack on Christie’s Social Security ideas by saying, if elected, “I promise you will get what you paid for.”
He meant that as reassurance, of course. But if he actually understood how Social Security works, he’d know that it could just as easily be understood as a threat. Social Security is a complex program with large amounts of redistribution across wage levels, household types, and generations. Many millions of people, especially lower-wage households, don’t “get what they paid for” — they get quite a bit more than they paid for, at least for now. Others get quite a bit less.
Indeed, Christie’s proposal could be seen as adding to the already substantial redistribution within the program from high-wage to low-wage households. Further, Christie has proposed important changes in the payroll tax — eliminating it entirely for workers age 65 and older and for those just entering the workforce under the age of 21. These tax cuts will help millions of lower-income households keep more of what they earn, without harming the Social Security program.
There’s no particular reason to be overly wedded to Christie’s approach. There are other ways to go about reforming the program, some of which I prefer to the Christie plan.
But inaction is not an alternative. The program is headed toward insolvency. The actuaries who look at Social Security’s finances every year say the program’s trust funds will be depleted of reserves by 2033. They also estimate that the program has an actuarial deficit of 2.88 percent of taxable payroll. In practical terms, that means it would take an immediate and permanent payroll-tax increase of 2.88 percent (on top of today’s combined employer-employee rate of 12.4 percent) to keep the program afloat for the next 75 years.
Governor Huckabee says he wants to cut taxes to promote growth, so presumably he would be against raising taxes on the “rich” to pay for Social Security’s shortfall. If he is also against reasonable adjustments in benefits, the only way to keep the program solvent would be with a large payroll-tax hike.
That would be ironic, because there is nothing that will hit working-class families harder than a hike in the Social Security payroll tax. They already pay far more in payroll taxes than in income taxes, and paying even more will not add anything to their benefits in retirement. All it will mean is a lower rate of return on their Social Security contributions.
Governor Huckabee claims to be representing average Americans against the rich and powerful. But his stances on Social Security should be understood as having the opposite effect. He is opposed to taking benefits from very well-off retirees, which makes it all the more likely that taxes will go up on the middle class.
— James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.