An Interview with Committee for a Responsible Federal Budget’s Marc Goldwein
Underfunded pension systems are one of the biggest challenges facing state and local budgets, resulting in an estimated $1 trillion to $5 trillion in total U.S. pension debt, depending on the practice of measurement used. In an effort to examine how we arrived in this predicament and what steps can be taken going forward to ease the overwhelming financial burden on governments, the Retirement Security Initiative (RSI) will talk with leading fiscal and policy experts to get their opinion and analysis on the funding crises. The below Q&A with Marc Goldwein, senior vice president and senior policy director at the Committee for a Responsible Federal Budget, is a special Election 2016 edition and the second in our Q&A series.
RSI: Social Security is the major source of income for most retirees, yet analysts estimate that the program will run out of funds to pay full benefits beginning in 2034. According to plans outlined by Hillary Clinton and Donald Trump, does either candidate adequately address the Social Security funding problem with real solutions?
MG: Absolutely not. Both candidates have their heads in the sand on Social Security policy.
Donald Trump’s plan is to keep the system on its current path to insolvency. Hillary Clinton’s plan expands benefits in targeted ways, such as to widowers and childcare providers, but otherwise she doesn’t change the program’s benefits or touch the age requirement. Both candidates are doing tremendous disservice by taking so many things off the table. Neither has a plan to make the system a long-term, solvent program for future generations.
If left on its current trajectory, today’s 50-year old will receive a 21 percent cut in benefits the year after they retire, which is a $100,000 cut in lifetime benefits and enough to double the number of seniors in poverty. And unfortunately there are no quick fixes that will save the program. For example, it’s unrealistic to think the funding shortfall can be addressed only with tax increases on high earners; and certainly it can’t be fixed by eliminating Social Security fraud, which would be just a drop in the bucket of what’s needed. The reality is we are going to need a mixture of new taxes and slowing the growth of benefits to begin to save the program. Unfortunately, neither presidential candidate has shown they have a plan to quickly stabilize the program’s finances.
For anyone wanting to see how their benefits will be affected under the program’s current trajectory, they can check out CRFB’s Social Security benefit calculator.
RSI: The scenario you paint for Social Security is dire and it would seem that public employees would have their pensions to make up for this retirement uncertainty. But, as more public pensions go underfunded, putting at risk public employees’ savings, that payoff may not be so certain. Instead of retirement being a major public policy issue this election, it has been absent from the political debate. What, if anything, do the presidential candidates’ policies do to address retirement needs?
MG: Unfortunately, as you said, retirement hasn’t been a big issue this election. The candidates are talking very little about retirement, whereas it should be one of the top things being addressed. This is especially true given the unsustainability of the Social Security program.
Neither Hillary Clinton nor Donald Trump have concrete plans to fix some of our most pressing retirement issues, like unsustainable pensions, holes in the Social Security program for low-income wage earners, access to retirement savings plans, and the list goes on. What should have been a priority in the political debate, has unfortunately been put on the backburner in this presidential election.
RSI: Switching gears, estimates show anywhere from $1 trillion to $5 trillion in total U.S. pension debt, adding on to the nation’s already historical levels of public-held debt. How do the candidates compare in their plans to reduce the nation’s debt?
MG: Neither of the candidate’s economic plans would slow and reverse the national debt. As of now, under current law, we are on a path to increase the national debt by $9 trillion in the next decade. As a result, debt would grow from 77 percent of GDP today – already a post-war record — to 86 percent of GDP in 10 years and 107 percent of GDP – the highest in our entire history – by 2036.
Hillary Clinton’s plan would keep national debt on the path we are headed, increasing it by a small amount: an additional $9.2 trillion in the next decade and $28.3 trillion by 2036. And while this is certainly the wrong direction, Donald Trump’s plan is catastrophically worse. It would add $5.3 trillion on top of the already $9 trillion over the next decade, putting the U.S. in unprecedented debt. Trump’s plan would ultimately increase the national debt to 105 percent of GDP by 2026 and nearly 150 percent of GDP by 2036.
In dollar terms, over the next 20 years, debt held by the public will rise from around $14.1 trillion today to more than $42 trillion by 2036 under Clinton and nearly $59 trillion under Trump, compared to $43 trillion under current law.
RSI: Many times it is taxpayers who pay the price of failing pension systems with raised taxes. In what seems like a never-ending sea of tax increases, how do Clinton’s and Trump’s tax policies stack up?
MG: Clinton and Trump are polar opposites when it comes to tax policy. Donald Trump’s plan would cut taxes for pretty much everyone—individual and corporate. Trump’s plan reduces tax rates from top to bottom, though it is heavily weighted for top earners. Overall, Trump’s plan calls for about $6 trillion in tax cuts, which, in turn, represents a huge debt burden and lends to unprecedented increases in the national debt.
On the other hand, Hillary Clinton’s plan would raise $1.5 trillion in taxes, targeting almost exclusively the top 2 to 3 percent of earners. Rather than go toward debt reduction, however, the tax revenue would go toward new spending initiatives to reduce college costs, offer government-financed paid family leave, expand the Affordable Care Act – also known as Obamacare, and provide for more child care, among other initiatives.
For more information on how the candidates stack up on fiscal policy issues, check out CFRB’s “Looking at the Long Term under the Candidates' Plans.” To learn more about CFRB, click here.
- Previously in our Q&A series, a conversation with the Rockefeller Institute's Donald Boyd.