The Issues: Hillary Clinton And Donald Trump On Social Security And Medicare | KERA News

The Issues: Hillary Clinton And Donald Trump On Social Security And Medicare

Oct 6, 2016
Originally published on October 6, 2016 8:44 am

Social Security alone consumes nearly a quarter of the federal budget.

At this week's vice presidential debate, Democrat Tim Kaine and Republican Mike Pence spoke about how the administrations they hope to join would deal with the challenges facing safety net programs like it.

Social Security

The Challenge

Social Security is a pay-as-you-go program, in which benefits for retirees and others are largely funded through the payroll taxes collected from current workers. As baby boomers retire, there will be more people drawing benefits out of the system and relatively fewer workers paying in. The Social Security trust fund helps to cushion that gap. But forecasters expect the trust fund will be exhausted in about 20 years. Once that happens, there will still be enough money coming into the system from payroll taxes to cover about 75 percent of retirees' benefits. But in order to keep paying 100 percent, some changes will be needed. The sooner policymakers act, the less drastic those changes will need to be.

The Fixes

Lots of different fixes have been suggested for Social Security but they basically boil down to a few: cut benefits, increase taxes, or some combination of the two. Ideas such as raising the retirement age or adopting less generous cost-of-living adjustments are effectively benefit cuts. Likewise, tax increases could take many forms.

Hillary Clinton

Hillary Clinton has ruled out cutting benefits. In fact, she wants to increase benefits for some people, including widows and those who drop out of the workforce temporarily to care for family members. "We have too many Social Security recipients right now who are barely making it," Clinton said in a town hall with MSNBC earlier this year.

Clinton is banking on some form of tax increase to ensure Social Security can keep paying its bills.

"We need to get more money into the Social Security trust fund to keep it solvent far into the future," Clinton told MSNBC. "There are a couple of different ways I'm looking at. And I'll have to talk with the Congress to try to figure out what's the best way forward."

One idea Clinton has floated is lifting the cap on income subject to the Social Security tax. Right now, income over $118,500 is not taxed for Social Security. If that cap were eliminated and benefits were unchanged, that would solve about 88 percent of Social Security's long-run funding problem. (By comparison, adopting a less generous cost-of-living formula would solve about 20 percent of the problem and gradually raising the retirement age would solve about 40 percent.)

Clinton has also suggested taxing capital gains and other investment income to help fund Social Security.

Donald Trump

Like Hillary Clinton, Trump has rejected any kind of benefits cut. Unlike Clinton, he's not looking to raise taxes.

"We're going to save Social Security," Trump told supporters at an Iowa campaign rally late last year. "We're not going to raise the age and we're not going to do all the things that everybody else is talking about doing. They're all talking about doing it and you don't have to. We're going to bring our jobs back. We're going to make our economy incredible again."

Stronger economic growth would help because more jobs and bigger paychecks would mean more payroll taxes flowing into the system. But many observers are skeptical that the United States can realistically achieve the kind of growth rates needed to fix Social Security without other changes.

Trump's immigration policies could also aggravate the funding challenge. He's called for deporting millions of immigrants living in the country illegally. Many of those immigrants pay into the Social Security system but don't draw benefits, effectively subsidizing U.S. citizens.

Medicare

Medicare provides health benefits for older Americans. In recent years, Medicare costs have been rising more slowly than they used to, but they're still climbing faster than the overall economy. Unless policymakers get a handle on those costs, taxpayers will be on the hook for growing expenses.

Clinton and Trump agree on some measures, such as trying to rein in the costs of prescription drugs. And both Clinton and Trump reject the idea of gradually converting Medicare to a voucher system in which the government subsidizes private insurance for future retirees. That plan is still an option in the GOP platform, however.

Trump has also promised to repeal the Affordable Care Act, including pilot programs that aim to promote more efficient delivery of health care.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

RENEE MONTAGNE, HOST:

And in this week's vice presidential debate, candidates were asked what they would do to keep Social Security solvent. Democrat Tim Kaine and Republican Mike Pence both promised to protect the retirement program, which consumes nearly 24 percent of the total federal budget.

(SOUNDBITE OF ARCHIVED RECORDING)

TIM KAINE: We're going to stand up against efforts to privatize Social Security and we'll look for ways to keep it solvent going forward, focusing primarily on the payroll tax cap.

ELAINE QUIJANO: Governor Pence, I'll give you an opportunity to respond.

MIKE PENCE: Well, thanks, Elaine. There they go again. OK - Donald - all Donald Trump...

KAINE: Go read the book.

PENCE: ...All Donald Trump and I have said about Social Security is we're going to meet our obligations to our seniors. That's it.

KAINE: Go read the book.

MONTAGNE: So that was Tim Kaine and Mike Pence, and Pence and his running mate Donald Trump have supported privatizing Social Security in the past. They're not following that route this year. We're going to spend the next few minutes exploring this as part of our election project What's the Issue. NPR's Scott Horsley is here to help with that. Good morning.

SCOTT HORSLEY, BYLINE: Good morning, Renee.

MONTAGNE: Social Security of course is a program that tens of millions of Americans rely on, and many more will in the future. What kind of shape is it in?

HORSLEY: Well, it's not in crisis, Renee, but there are some cracks in the foundation. The basic challenge is demographic. Social Security is basically a transfer program where workers pay into the system through payroll taxes and retirees draw out through benefits. As more and more baby boomers retire, we're going to have more people drawing Social Security and fewer working-age people paying into the system.

We knew that was coming, so we built a cushion - that's the trust fund - and it helps to balance the gap. But the way things are going right now forecasters think the trust fund will run dry in about 20 years. Now, that doesn't mean Social Security checks would stop at that point. You'd still have enough money coming in from payroll taxes to cover about 75 percent of the benefits. But if you want to keep paying 100 percent, you're going to have to make some changes.

MONTAGNE: Which brings us to the candidates. Let's start with Hillary Clinton.

HORSLEY: OK, so there are two basic flavors of fixes you can have here. One is you can cut benefits for recipients, or the other is you can raise taxes for people paying into the system. Hillary Clinton has basically ruled out cutting benefits. In fact, she wants to increase benefits for some people, including widows and those who dropped out of the workforce temporarily to care for family members. So she's putting her stock in raising revenue. Here's what Hillary Clinton said during a town hall meeting on MSNBC earlier this year.

(SOUNDBITE OF ARCHIVED RECORDING)

HILLARY CLINTON: We need to get more money into the Social Security trust fund to keep it solvent far into the future. There are a couple of different ways I'm looking at, and I'll have to talk with the Congress to try to figure out what's the best way forward.

HORSLEY: One of the ways that both Clinton and Kaine have emphasized is raising the cap on income that's taxed for Social Security. Right now, wealthy people only pay into Social Security on part of their income, up to about $118,000. Everything above that is exempt from Social Security taxes. If you did away with that cap and left the benefits alone, that would solve about 90 percent of the problem.

MONTAGNE: So what about Donald Trump? What are his proposals?

HORSLEY: Like Hillary Clinton, Trump has sworn off any kind of benefits cut. Unlike Clinton though, he also seems to reject any kind of tax increase. Instead, Trump is counting on the power of economic growth. Here he is speaking at a campaign rally in Iowa late last year.

(SOUNDBITE OF ARCHIVED RECORDING)

DONALD TRUMP: We're going to save Social Security. You're going to get your pay - we're not going to raise the age and we're not going to do all the things that everyone else is talking about doing. They're all talking about doing it, and you don't have to. We're going to bring our jobs back. We're going to make our economy incredible again.

HORSLEY: Now, stronger economic growth would help because with more jobs and bigger paychecks you would have more payroll taxes coming into the system. However, most of the observers I talk to are skeptical that the United States could realistically achieve the kind of growth rates that would be needed to solve this problem all by itself.

What's more, if Trump follows through on the idea of deporting millions of immigrants who are living in the country illegally, that could aggravate the problem because many of those immigrants do pay into the Social Security system and they don't take money out. So in effect, they are subsidizing U.S. citizens.

MONTAGNE: And, Scott, what about another big safety net program, which would be Medicare, what's going on there?

HORSLEY: Well, the good news is Medicare costs have been growing more slowly than they used to. The bad news, though, is they're still growing faster than the overall economy, and that's likely to continue as the population gets older. So taxpayers will be on the hook unless we can get a handle on those costs.

There is actually some common ground between Trump and Clinton on cost containment efforts. Both, for instance, want to rein in the price of prescription drugs. A big difference of course is that Trump wants to repeal Obamacare and all of its pilot programs that aim to promote more efficient health care delivery. There's a big debate over how much credit Obamacare deserves for slowing the growth in health care costs.

In years past, Democrats have attacked Republicans for suggesting that the government gradually convert Medicare into a voucher system in which the government would help future retirees pay for private insurance. Both Clinton and Trump say they are against that idea, although I should say it's still part of the Republican party platform.

MONTAGNE: Scott, thanks very much.

HORSLEY: You're very welcome.

MONTAGNE: That's NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.