Future seniors may see benefits tied to means testing
WASHINGTON — Mitt Romney wants to save Social Security and Medicare partly by cutting benefits for higher-income recipients. President Obama also sees wealthy Americans as part of the solution but suggests instead raising their premiums or payroll taxes.
The fact that both presidential candidates back some form of so-called “means testing” suggests that millions of future seniors will probably end up paying more, or getting fewer benefits — no matter who wins the White House.
The emphasis on means testing as a way to save entitlement programs is, in part, the result of a lack of other options. Tax increases are difficult to pass, blanket cuts in benefits are unpopular, and privatization efforts have sputtered.
In the previous two presidential campaigns, for example, Republicans focused mostly on the idea of using private accounts in Social Security and gave little notice to means testing. But the private account idea faded, partly as a result of the Great Recession, and the conservative Heritage Foundation recently endorsed means testing as part of a solution for saving Social Security.
“It makes perfect sense,” said Heritage’s David John, a Social Security specialist. “The idea is to put scarce resources where they are most needed and trim areas where they are not as essential. Means testing is a very simple, easy way to accomplish that.”
Both candidates say their plans will not affect those in or near retirement.
The federal government has several dozen programs that rely on means testing, but most come out of general revenues and are aimed at lower-income people, such as welfare and food stamps. Critics have said the programs send aid to people who don’t need assistance or don’t want to get off it, a view that Romney alluded to when he said 47 percent of Americans view themselves as “victims” and won’t take personal responsibility. Advocates for the programs argue that means testing insures that the money only goes to the neediest.
Applying means testing to programs such as Social Security and Medicare is particularly sensitive because they are social insurance programs that require payments from workers and their employers.
“We are against means testing,” said Richard Fiesta, director of government and political affairs at the Alliance for Retired Americans, which includes union retirees among its 4 million members. “Your benefits should be within the box of what you and your employer contributed regardless of whatever income you have, just like any other insurance.”
But analyzing the plans of the candidates is difficult, he said, “until someone puts something to paper.”
In last Wednesday’s debate, Romney reiterated his support for means testing of Medicare, saying, “We have to have the benefits high for those that are low income, but for higher income people, we’re going to have to lower some of the benefits.” Romney had previously endorsed means testing for Social Security in a “60 Minutes” interview last month.
Romney’s remarks were notable in part because they seemed at odds with a comment he made earlier last month, when he criticized Obama for having favored government policies that redistribute taxpayer payments to government from the rich to the poor. Obama had said in 1998 that “I actually believe in redistribution, at least at a certain level, to make sure that everybody’s got a shot.”
Romney said Obama’s view is wrong. “I know there’re some who believe that if you simply take from some and give to others then we’ll all be better off,’’ Romney said. “It’s known as redistribution. It’s never been a characteristic of America.”
Glenn Hubbard, one of Romney’s chief economic advisers, said in an interview that Romney wants means testing to apply to benefits, not taxes. Hubbard said Romney wants both Medicare and Social Security to be “more progressive’’ by cutting benefits to higher-income people.
“We shouldn’t be reducing the way we care for lower and moderate income families,” said Hubbard, dean of Columbia Business School.
Romney also has suggested raising the eligibility age at which Social Security benefits are provided. Under current rules, a person born in 1960 would be eligible for full benefits when turning 67 years old. Romney has said he would add “a year or two” to the eligibility age. Analysts noted, however, that lower-income people would probably die earlier, meaning they would get fewer benefits in their lifetimes.
Romney’s campaign has seized upon Obama’s lack of specifics as a major difference between the candidates. “The president has proposed nothing, zero, nada, on Social Security,” Hubbard said.
Obama spoke vaguely in the debate about Social Security, saying that “I suspect” the two candidates have similar positions, while adding that the program would have to be “tweaked” as it was in 1983. That bipartisan overhaul was not considered a tweak at the time; it raised the eligibility age and increased payroll taxes.
Obama’s latest budget speaks only in broad ways about Social Security. It calls for strengthening Social Security and protecting retirees and rejects cuts in benefits. But it does not lay out a specific proposal and does not reference Obama’s past discussion of increasing Social Security taxes on wealthier recipients. Instead, it includes phrases such as “we should come together now, in bipartisan fashion.” It makes no reference on whether the retirement age should be raised.
Obama has talked repeatedly since 2007 about a proposal in which Social Security taxes would be raised. Currently, such taxes are levied on the first $110,000 of income and capped. Obama has said he might support a proposal for a plan in which extra Social Security taxes are also levied on earnings above $250,000.
“You know, I do think that looking at changing the cap is an important aspect of putting Social Security on a more stable footing,” Obama said last month.
But when Obama adviser David Axelrod was recently asked on MSNBC why the president hasn’t put forth specifics, he responded: “We’re not going to have that discussion right now unless the Congress wants to sit at a table and move on a balanced approach to this.”
As for Medicare, both candidates have endorsed means testing, but, as in Social Security, they differ in how they would apply it.
As part of Romney’s plan to turn Medicare into a voucher program, he would cut benefits for higher-income people, while “lower income seniors in the future will receive the most generous benefits,” according to his website, which says Romney “continues to work on refining the details of his plan.”
Obama has proposed that monthly premiums for Parts B and D of Medicare paid by higher-income retirees be raised 15 percent starting in 2017,said his campaign.