Well, he’s not even president yet and we already have a very worrisome sign.
But before telling you what is worrisome, let me share two pieces of background information.
First, state and local government bureaucrats enjoy much higher levels of compensation than workers in the productive sector of the economy.
I’ve documented the difference in the past, but here’s a chart based on the latest numbers. And notice that the biggest advantage for state and local bureaucrats is their benefits.
Regarding their benefits, some state and local bureaucrats are exempt from participating in Social Security because they get very generous pensions from their government jobs.
That’s the first bit of background info. The second bit of background info is that America’s Social Security system faces a giant long-run shortfall.
Failure to address the problem will mean either massive tax increases, big benefits cuts, or ever-larger levels of red ink.
Now let’s connect the dots regarding Trump and these two bits of background information.
Both the House and the Senate are pushing to expand an already-bankrupt Social Security program by giving extra money to retired state and local bureaucrats.
I’m not joking. Here are some excerpts from a column by Andrew Biggs of the American Enterprise Institute.
The United States Senate is approaching a vote on the so-called “Social Security Fairness Act,” legislation that would eliminate adjustments to Social Security benefits for a select of public sector employees who are not covered by Social Security but instead participate in alternate government pension systems… The Social Security Fairness Act overwhelmingly passed the House in early December and on December 18 cleared a key Senate procedural vote by 73 to 27. …half a century ago, Congress realized that Social Security benefit windfalls for public sector employees were costly, unnecessary and unmerited. And so in 1983 Congress established a Social Security benefit rule called the Government Pension Offset (GPO). The GPO reduces the Social Security spousal supplement paid to a retiree with a non-covered pension by two thirds of the pension’s amount. …the Social Security Fairness Act would repeal the Government Pension Offset and restore the full quarter-million dollar lifetime windfall… It is one thing for Congressional Democrats to vote to repeal the Government Pension Offset. Public sector employees are core supporters of the Democratic Party and such transactional politics, while wrong, aren’t exactly unexpected. But for Republicans to restore potentially massive Social Security windfalls to retired public employees who may not have paid a penny into Social Security and who already have high-quality government pension plans, at the cost of nearly $200 billion over 10 years…, fund is a travesty of both fairness and fiscal conservatism.
Eric Boehm of Reason has a similarly hostile assessment. Here are some excerpts from his article.
The Senate is reportedly set to vote on a bill boosting Social Security payouts to public sector workers who receive pensions and did not pay taxes to support Social Security while working in the public sector… If it passes, the proposal will cost nearly $200 billion… That’s because this change will obligate the payment of more Social Security benefits to people who are not paying into the system. …Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a press release. “…it just restores windfalls for folks who have other government pensions. What an incredulous set of events.” …In short: By allowing public workers to double-dip into retirement benefits they did not contribute towards, this bill will make everyone who did pay for Social Security worse off.
Last but not least, here are some passages from the Wall Street Journal‘s editorial on the topic.
Republicans claim to want to reduce the budget deficit, but then why are they joining Democrats in raiding Social Security for nearly $200 billion in extra benefits for government workers? The House last month passed the misnamed Social Security Fairness Act, 327-75. Senate Majority Leader Chuck Schumer vowed at a rally with union leaders last week to hold a vote on the bill this week. …What’s unfair is rewarding high-paid government workers with larger Social Security benefits than they earned. That’s essentially what the bill would do. …Many state and local government employees who receive pensions don’t pay into Social Security. Instead they earn pensions that are far more generous than the average Social Security benefit. …We know Republicans are phonies on spending restraint, but handing a huge victory to unions like the teachers and Afscme that back Democrats takes a special kind of political masochism. Please spare us any future whining about debt and deficits.
At this point, you’re hopefully thinking this is very bad policy. But you may also be wondering what this has to do with Trump.
The connection with Trump is that he has – or at least had – the power to stop this massive giveaway. All he had to do is say this is a ridiculous waste of money that enriches an already over-compensated group of bureaucrats and Republicans in the Senate almost surely would have voted no.
Instead, Trump said nothing and these 24 Republicans – including the soon-to-be Vice President! – voted to make America more like Europe.
By the way, House Republicans also behaved recklessly, with an even-greater percentage of them voting for this giveaway.
Trump also could have told them to vote no and they presumably would have obeyed.
The bottom line is that America’s grim fiscal outlook got worse during Trump’s first term and this latest episode of fiscal profligacy suggests it will also get worse during his second term.
Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.
