Federal lawmakers are currently struggling to pass a third coronavirus crisis response bill, by far the largest of the three they hope to enact. This “phase three” package is shaping up to be a massive outpouring of deficit spending stretching into the trillions of dollars, a desperate federal effort to stabilize a U.S. economy that has been brought to a virtual standstill. Given the severity and urgency of the situation, we should not expect the federal response to be characterized by precision, efficiency or restraint. Elected officials would far rather risk doing too much than too little. Nevertheless, a line can and should be drawn against exploitation of the current crisis to advance policy agendas unrelated to it.
A prime example of an extraneous initiative is the proposal by Massachusetts Democratic Senator Elizabeth Warren to increase Social Security benefits across the board by $200 a month. Warren’s plan, proposed during her recent run for president, predates the coronavirus crisis by several months and bears no relationship to current needs. Yet two days ago, Senator Warren (joined by Senators Chuck Schumer (D-NY)and Ron Wyden (D-OR) nevertheless proposed that it be included in the coronavirus relief legislation. She and her cosponsors proposed a “temporary” version of the proposed benefit increase, lasting through the end of 2021. These sponsors are undoubtedly aware of how difficult it would be two years from now for lawmakers to allow retirees’ monthly checks to shrink back down by $200. Accordingly, advancing this proposal risks a substantial possibility that this ill-conceived measure would become an extremely expensive and permanent new cost.
Some context is important here to understand just how damaging this proposal would be. Social Security already faces a financing shortfall, estimated at $13.9 trillion in present value, which is an enormous threat to current participants’ future benefits. An across-the-board benefit increase would not only worsen that financing shortfall, it would worsen several other severe problems facing Social Security, including: substantial net income losses the program would impose on younger workers, aggregate program cost burdens rising faster than taxpaying workers’ earnings, disincentives for workforce participation and discretionary saving, and pockets of regressive income transfers (i.e., from poorer Americans to richer ones).
According to the analysis released by the Warren campaign, Social Security would still go insolvent under her proposal, even if coupled with an expansion of the payroll tax to gradually cover all U.S. earnings (it’s currently applied to 83% of all earnings), and increasing the rate to 14.8% on earnings above $250,000. In other words, Senator Warren proposed a massive tax increase to finance an enormous expansion of benefits, while leaving Social Security’s insolvency problem unfixed. Worse yet, consider that the latest incarnation of this idea is to increase Social Security’s benefit obligations without increasing the payroll tax. The only possible result would be to speed Social Security faster toward either insolvency, or toward a bailout from general government funds that destroys the program’s longstanding financing basis, and with it the source of its strength and reliability.
We are in the midst of a burgeoning economic crisis borne of the fact that many forms of economic activity have been brought to a halt. This is resulting in countless hourly wage-earners, concentrated especially in the service industries, suddenly losing their income. The economic disruption is threatening the viability of many businesses suddenly deprived of customers. Financial markets are plunging in response to these developments.
The problems described above are not addressed in the least by increasing Social Security benefits. Social Security beneficiaries are those who have already left the work force due to age or disability; they are not generally those who are losing their jobs due to the current crisis and they are still getting secure income through their Social Security benefits. Nor would larger Social Security checks solve the problem that Americans are currently being prevented from spending their money with the businesses at greatest risk of failure. We could give retirees as large a benefit increase as we wish, but if stores and restaurants are closed that extra spending power does little to help affected workers.
How generous and expensive the Social Security system should be is a subjective question on which equally well-intended individuals can disagree. That, however, is a long-term policy question, not a question of what to do about the current economic crisis. It is a distraction from the important work that lawmakers need to do right now.
There is no avoiding the reality that Social Security always makes for opportunistic politics. It has long been the case that irresponsible politicians have sought to court political support by promising Social Security benefits they have neither the ability nor the intention to pay, thereby requiring responsible elected officials to take the political hit for not acquiescing. Such political opportunism is never admirable. In the current crisis environment, it is reprehensible.
We have arrived at a historic moment when Americans need to pull together, across party lines, from all demographic groups and regions, to face down an urgent threat to our health and to our economy. We won’t get the answers perfectly right, because none of us knows everything, and we have a wide range of ideas from which to choose. Perhaps it’s too much for all elected officials to ignore all political considerations as they go about their tasks. But surely, our elected officials should be able to resist exploiting the current crisis to advance the most irresponsible ideas.