by Marco Rubio
Some liberals in Congress have proposed that the Social Security payroll tax be raised on working people and their employers in order to expand Social Security benefits for all, regardless of their need. But unlike the income tax, everyone pays payroll tax, regardless of how little you earn. Raising a payroll tax on everyone would be a significant tax increase on millions of Americans who are barely getting by as it is. Therefore, instead of raising taxes (which seems to be the left’s solution to every problem), a better approach would be to eliminate the payroll tax altogether for all Americans who have reached retirement age.
The reality of the new century is that more and more Americans will be working well past the legal retirement age. For some, like Joyce and Scott, this might be out of necessity. But for many others, including a significant percentage of my colleagues in the Senate, it will be by choice. I am now just a little over twenty years away from retirement age myself. It is hard for me to imagine retiring at sixty-five and spending the next quarter century not working. I expect to be working, doing something productive and fulfilling. I honestly know few people in my generation who do not expect the same. By the time people reach retirement age, they have already paid their fair share. We shouldn’t punish them for choosing to keep working rather than immediately cashing in.
Eliminating the payroll tax on workers who have reached retirement age will do several things I dare say liberals would agree with. In addition to removing the disincentive to work, it will help seniors accelerate their savings by letting them keep more of their money. In fact, it could also make older workers more attractive to employers, since the employer’s half of workers’ payroll taxes would also be eliminated. Finally—and I can’t believe there would be much argument about this—the elimination of the payroll tax for those past retirement age could be accomplished with little or no effect on Social Security revenues. A study cited by former deputy Social Security Commissioner Andrew Biggs found that a 10 percent increase in after-tax wages for those sixty-two and older would result in a 1.1 percent increase in the labor supply. This increase in workers, in turn, would raise federal tax revenue enough to offset about three quarters of the loss of revenue from the elimination of the payroll tax. When increased state tax revenue is taken into account, this payroll tax cut for older Americans essentially pays for itself.9
I have heard some people suggest that with unemployment so high and jobs so scarce, we shouldn’t be pumping the labor force with more workers by giving seniors incentives to work longer. They reason that if seniors don’t stop working we won’t have enough jobs for younger workers. It’s an interesting theory, but it’s bad economics. The American economy doesn’t work that way.
This argument is part of the same faulty logic used by opponents of free trade and legal immigration—and it’s a cousin of the logic that says income inequality is more important than opportunity and upward mobility. All these arguments rest on two faulty assumptions. The first is that people are a liability. That more people, in our country or in our workforce, means more obligations on government. To the contrary, real conservatism views people as assets, not liabilities.
More people doesn’t just mean workers or government beneficiaries. It also means more taxpayers for government and more consumers for business. So if a retiree remains in the workforce and as a result has a higher income, this means he or she will also be paying more taxes than otherwise. And the higher income also means he or she will be able to spend more at the places that employ younger Americans.
Which leads to the second false assumption: that the economy is a zero-sum game—more for you means less for me. In this case, the claim is that more jobs for older people means fewer jobs for younger people. In fact, studies show that an increase in older workers has no effect on the number of jobs for younger workers, and may even slightly boost the number of jobs for younger workers. Just like anyone else, older people who are employed have more money to spend, which creates more jobs.
More savings and more work are essential to hold off a retirement crisis. But the elephant in the living room for most Americans when they contemplate their golden years is Social Security. It can’t be the only source of our income in old age, but it is the essential guarantee of a safe and secure retirement in America. It must be saved. And to be saved, it must be reformed.
Rather than reform Social Security, however, some folks in Washington would rather double down on the program as it exists and throw more money into it. Either that, or they deny there’s any problem and refuse to take any action at all. When President George W. Bush offered a plan to reform the program in 2005, House Minority Leader Nancy Pelosi was asked when her Democratic colleagues would put forward their own proposal. Her answer? “Never. Is ‘never’ good enough for you?”10
Failing to modernize Social Security, however, will eventually lead to an outcome we can’t buy our way out of, no matter how high we might raise taxes. The 2013 Social Security Trustees Report declared that over the next decade Social Security will pay out about $984 billion more in benefits—almost $1 trillion—than it will collect in payroll taxes. The fact is, the country has changed enormously since the passage of Social Security. Yet the basic benefit rules have failed to adjust accordingly.
Take the retirement age. In 1940, when an American turned twenty-one, his chances of living to retirement age were only about 55 to 60 percent. But today, a twenty-one-year-old’s chances of reaching retirement age are around 80 percent. Since we are living longer, we are working longer. If you doubt me, I invite you to come see the United States Senate at work. There you will find plenty of evidence that more and more Americans are choosing to work well past the age of retirement.
What these longer working lives mean in practical terms is that we now have a record number of Social Security beneficiaries. And these beneficiaries, on average, are living another five to ten years longer than Social Security’s earliest recipients.11 This is good news, of course. I am blessed that my mother is still living and therefore a part of my children’s lives. But it also presents us with a new dynamic we didn’t have when the program was first designed.
In the past eighty years, Congress has increased the retirement age by two years, from sixty-five to sixty-seven. This is some progress in adjusting Social Security to the modern era, but not enough to ensure that the program will be there for your kids and my kids. We need to increase the retirement age for future retirees to account for the rise in life expectancy. If we act soon, we can do this without changing the retirement age for people who are currently over the age of fifty-five.
Another modernization to Social Security that should gather bipartisan support at a time when the growing divide between the rich and the poor is occupying so much political space is strengthening the program as a safety net for those at the bottom of the income scale. Americans who have worked their whole lives for low wages, like my parents, shouldn’t be consigned to poverty in their old age. For these Americans, Social Security benefits are a substantial—in fact, irreplaceable—source of income in retirement.
Contrast this with high-income retirees. For wealthy retirees, monthly Social Security benefits are a less significant portion of their finances. The obvious answer is to adjust the benefits in the program to preserve and strengthen it for our children and grandchildren. Democrats resist this change on the grounds that turning Social Security into an income transfer program like traditional welfare will cause it to lose support among Americans. But this kind of ideological argument doesn’t hold water. First, proposals by Democrats like Senator Elizabeth Warren to raise the amount of income subject to the payroll tax but keep benefits the same would do exactly that: turn Social Security into an income transfer payment by breaking the link between contributions and benefits. Second, it’s hard to see how a program as popular as Social Security could fall out of favor with the American people by showing compassion for the less fortunate.
Th
e demographics of Social Security have turned brutally against the program. Too few workers today support too many retirees. Increasing the benefit for all retirees would put unrealistic and unsustainable strain on the program. The answer is to reduce the growth of benefits for upper-income seniors while making the program even stronger for lower-income seniors. This wouldn’t be a cut but simply a reduction in how fast the benefit will increase for wealthier retirees. Making this commonsense change will add years to Social Security’s solvency. It is one of the best ways to save the program for high-income and low-income beneficiaries alike.
The third reform needed to avert a retirement crisis is also the most difficult: saving Medicare for all American seniors.
As with Social Security, my attachment to Medicare is deeply personal, even selfish. When my father got sick, Medicare paid for his many hospital stays. As he reached the end of his life, Medicare allowed him comfort and dignity by paying for his hospice care. My mother benefits from it to this day. Medicare, like Social Security, is absolutely essential to maintaining a secure, healthy and comfortable retirement for seniors. But Medicare, like Social Security, will cease to exist if we do nothing to reform it.
Again, this is not a scare tactic. It is simple math. In 2012 Medicare spending grew by 4.6 percent—to about $580 billion. Between now and 2022, this growth rate is expected to accelerate to around 7.4 percent per year.12 At this rate, within eleven years the Medicare Trust Fund will run dry.
There was once a time when talking about Medicare reform was a third rail of American politics. But as we get closer to impending doom, it seems more people are at least willing to discuss serious ideas about how to save Medicare. I’m happy—even eager—to have that conversation. It needs to begin by taking a hard look at what recent reform efforts tell us about what works and what does not when it comes to making health care accessible to all Americans.
The Affordable Care Act—Obamacare—is about to turn five. The impending anniversary of the passage of this law raises the iconic question: Are you better off than you were five years ago? The answer for most Americans is an unequivocal no. Jobs have been lost. Hours have been cut. Employers have been forced to drop coverage. Premiums have skyrocketed. Millions have lost coverage they were happy with.
Obamacare has even hurt Medicare recipients by cutting about $156 billion out of Medicare Advantage. This cut was a grave miscalculation. Medicare Advantage is a shining success story that millions of seniors like my mom rely upon. In short, it allows you to receive coverage from a private provider using funding from Medicare. Its free-market structure has encouraged providers to compete for business by tacking on all sorts of value-added services for seniors. For example, one of the reasons my mom picked her current provider is because, in addition to good doctors, they pick her up and drive her to appointments.
This sort of competition in the marketplace invariably leads to two very good things: a decrease in prices and an increase in choices. Choice and competition are also at the heart of another Medicare success story: Medicare Part D. Through this market-based program, seniors have at least twenty-eight different prescription drug coverage plans to choose from, and competition has worked as a powerful cost control mechanism. The Congressional Budget Office found that total program costs are on track to be 45 percent less—or $348 billion—than initial ten-year projections. Average monthly premiums are expected to be $31 in 2014, less than half of the $64 originally predicted. Not only does Medicare Part D’s design save money, seniors love it: 95 percent of seniors enrolled in Part D find it convenient for their needs.13
There are important lessons in the mistakes of Obamacare and the successes of Medicare Advantage and Medicare Part D for ensuring the health and continued existence of Medicare itself. If history is any guide, the key is to avoid command-and-control rationing and instead dramatically expand health care choices for seniors. A marketplace of choices will spur competition and extend the solvency of the Medicare Trust Fund, all while making sure traditional Medicare remains an option. If we act now, we can save Medicare and provide health security to America’s seniors.
The solution I support is a transition to a premium support system that would give seniors a generous but fixed amount of money with which to purchase health insurance. They could choose to buy from either Medicare or a private provider, and the choice would be theirs to make. My friend Paul Ryan is a leader when it comes to Medicare reform. During my campaign in 2010, I supported a couple of key proposals to fix the program that were detailed in his Roadmap for America’s Future. Since then, he has teamed up with Oregon Democratic Senator Ron Wyden to propose a bold bipartisan plan to institute the premium support model.
The way this plan works in practice for American seniors is crucial. No one over the age of fifty-five would see a change in their benefits. For others, the government contribution they receive would be pegged to either traditional Medicare or the average bid from private providers—whichever is cheapest. This way, if seniors choose plans that cost more than that benchmark, they would have to pay the difference. If they choose cheaper plans, they would get to keep the savings. The level of support would increase with age, and poor seniors and those with the most health care needs would get more support.
The way this plan works to save Medicare is also crucial. Competition between private plans and traditional fee-for-service Medicare will create choices for seniors while controlling costs for taxpayers. Some providers will offer the same health benefits as traditional Medicare but for less money. Others will offer innovative benefits that are specifically focused around the needs of seniors. The CBO predicts that by 2030 Medicare spending under a premium support plan would be 7 percent less per person than under the current system.14
As I mentioned, this reform will not be easy—worthwhile endeavors rarely are. But anyone who considers Medicare worth saving will give this plan a serious look. And any American who cares about the security of his or her retirement will demand leaders who do.
In a few months, I will turn forty-four years old. It seems like just a few days ago that I was graduating high school, or standing at the altar, or welcoming our first child home. The older I get, the more I am reminded of how quickly things move, and how it’s never too early to start planning ahead for the next phase of life. As a citizen and a husband, this means saving for retirement. It means seeing what it will take to be ready when the time comes. It also means preparing for the fact that, if nothing changes, by the time I reach full retirement age at sixty-seven, Social Security and Medicare will have been insolvent for years.
I have an additional responsibility, though: the responsibility that belongs to all who are elected to serve. My responsibility—to the American people, to my parents, to myself—is to save these programs. But many of my colleagues in Washington—especially big-government liberals—don’t seem to feel the same way. As a senator, then as a candidate and now as president, Barack Obama has never offered a serious proposal to fix Medicare and Social Security. The same goes for Hillary Clinton. Instead, they consistently have chosen to use any proposals to save these programs as political weapons against Republicans. As they do, it becomes increasingly clear that big-government liberals are more interested in winning elections than saving these programs.
It may help a politician defeat an opponent at the ballot box, but the ultimate price of inaction will be paid by future retirees. What many in politics seem to have forgotten is that we are here to serve the public interest, not posture politically. Yet so many politicians are unable—or unwilling—to acknowledge that their lack of action dooms the very programs they claim they are committed to preserving.
Partisan politics in America has always been contentious. But throughout our history, on issues of generational importance, our leaders have agreed to put aside politics for the sake of our people. If ever there was an issue worthy of this solidarity, it is preserving a secure retirement for twent
y-first-century seniors. Should we fail to address it, history will point its finger at all who stood aside or stood in the way.
The next president of the United States will be unable to serve two full terms without confronting this looming crisis. The sooner we act, the less disruptive these reforms will be. In these pages I have presented an agenda for addressing this crisis head-on. I’m ready to take whatever political fallout it generates. But most important, I am eager to work with anyone—Republican or Democrat—who will work in good faith on these reforms.
Chapter Seven
VALUES—AND THE FAMILIES THAT TEACH THEM
India is a young woman with an American success story for our times. She rose from poverty and homelessness and beat the odds, not just because she overcame a lack of things in her life. No, she’s special because she overcame a lack of values in her home—the values transmitted by strong families and stable communities. India’s story is remarkable and inspirational. But it’s also the exception that proves the rules about what it takes to achieve the American Dream.
Today India is a graduate of the University of Florida with a master’s degree and a career as a school administrator. But she was born with the odds stacked against her. She grew up in public housing in Venice, Florida, the ninth of ten children to a mother struggling with alcohol and a father who was haphazardly in and out of their lives. She talks matter-of-factly about the abuse she suffered at home and the conditions in her neighborhood. Loud music blaring all night. Drugs sold openly on the corner. Alcohol everywhere—inside and outside her home. She recalls being beaten with extension cords until she was covered with welts. She was often reluctant to tell the police when her mother hit her because she had to be home to care for her mentally handicapped little sister. Still, the police were at India’s home so often that by the time she was fifteen the cops knew her by name.
