Diary

Joe Biden plays Geriatric Santa Claus

So, for those of you following our rival party’s presidential primary, you may recall that former Vice President Joe Biden is currently leading the polls and getting many of the endorsements from Democratic Party politicians.  Biden, at age 77, who has spent his entire life as a career politician (first elected to the senate at the minimum age of 30 in 1972), is now being billed as the “moderate” candidate, the one who harkens back to the Democratic Party of old; the champion of the working man and the middle class, who just wants to protect everyday people from the Republican ogres.  Frankly, it’s a narrative that I think may have resonance with older Americans who yearn for an earlier era of politics, when Americans shared a core set of values and Republicans and Democrats could be friends.  Ah, those were the days.  However, while the argument does have a certain consistency to it, I am highly doubtful that this strategy, or Biden as standard bearer, can form a winning coalition.

In any case, Biden, the standard bearer of the middle class, has come out with a policy proposal to appeal to those older Americans that his entire brand is supposed to appeal to, which is outlined below:

https://joebiden.com/older-americans/

Below is a summary of the provisions of the proposal, and my commentary upon it:

  1. Capping prescription drug prices and allowing Medicare to negotiate drug prices.

This is one of the more appealing aspects of the plan, and I hear Trump’s HHS is considering similar measures.  Unfortunately, price caps inevitably limit supply, and will cause drug shortages, declines in quality, or limit research and development so that fewer drugs are developed and fewer diseases cured.  Ultimately, if something like this comes to pass, we have President George W. Bush to thank for championing and shepherding the Medicare Modernization Act of 2003, which added the prescription drug benefit to Medicare in the first place.  Before that, Medicare had very little impact on the prescription drug market, and drugs were actually much cheaper.

 

  1. “Protecting” Medicare and Medicaid by continuing unsustainable spending levels and opposing any reforms. Also, establishing a tax credit for long-term care providers.

Under the actuary’s projections, Medicare is projected to run out of money to pay benefits in 2026.  At that point, the incoming payroll taxes will cover about 90% of the scheduled benefits.  At that point, either taxes will need to be increased, or benefits will need to be adjusted so that the incoming payroll taxes cover the cost.

In other words, guaranteeing a continuation of the benefits is another way of promising a tax increase.

 

  1. Increasing taxes by removing the cap on covered earnings (currently, the 6.2% payroll taxes on wages, split between the worker and employer is limited to roughly the first $130,000 of earnings). Also, increasing Social Security benefits for older retirees and widows.  Currently, when one spouse dies, the surviving spouse continues with 50% of the deceased’s benefit.  From what I can tell, Biden is proposing to increase that to 60%, and to give a benefit bump once retirees have been receiving benefits for 20 years.

Removing the wage cap is common fare on the left (actually, there is a proposal out there to not only lift the cap, but to raise the rate all the way to 8%.  “Moderate” Biden doesn’t go that far).  Actually, I’m not against lifting the cap, but ONLY if is done in combination with cutting the rate, because I think the current tax structure is highly regressive and unfair to middle income workers.  Raising the cap and lowering the rate so that revenue remained the same would just be an adjustment.  However, what Biden is proposing is just a tax increase, plain and simple, and would hamper economic growth significantly by taking money out of the productive economy.

 

The benefit adjustments are just a socialist giveaway, pure and simple, meant to entice the older voters that Biden supposedly appeals to.  Of course, all of these benefit increases will have to be paid for by younger workers and future generations, but he’s banking on them not thinking about that.  Biden is an old-school union Democrat, and this is typical fare for his ilk.  Union officers have been doing it for generations; buy votes with pension bumps that will need to be paid for in the undefined future.

 

  1. “Equalize” saving incentives for middle-class workers by providing tax incentives for lower income workers.

The argument here is that higher income earners have larger incentives to save under the current tax code, since 401(k), 403(b) and IRA contributions are deducted from taxable income, and higher tax rates means higher deductions.  Of course, this is factually true.  However, it’s a matter of opinion that this is unfair in any way.  If you pay higher taxes, it makes a certain amount of sense that you should get larger deductions.  Furthermore, these are just tax deferrals, not deductions.  So if you make a lot of money while you’re working, you’re probably going to have good income when you retired, and when you pay taxes on your withdrawals, you’ll pay more taxes that a low income earner will.  Also, this argument ignores the regressive benefit formula of Social Security, which replaces a much larger share of income for low income workers.

Essentially, this is just a giveaway to lower income workers.  Socialism, in a word.

 

  1. Protect older workers from age discrimination, and remove the age cap on the earned income tax credit.

Um, they already are protected, by the Age Discrimination in Employment Age of 1967.  This is just pandering to older voters with a non-issue.  The EITC is just an expansion of welfare.  Besides, older Americans are protected from poverty by their receipt of Social Security, which again, provides a very large share of pre-retirement income for low income workers.

So there you have it.  Biden is pandering to older voters and offering all kinds of goodies and giveaways.  No doubt, this is meant to appeal to the kind of voters he will need to win the Democrat primary.  However, it remains to be seen whether this can help him in a general election.  Older voters are already inclined to vote Republican.  Presumably, this might lure some of them, but it could turn off others, and it certainly will not excite the young voters that a Democrat needs to win a general election.  If anything, it could easily turn them off when they consider the price tag.

Bottom line:  if this is the best that the mighty Joe Biden has to offer the electorate, I ain’t scurred of him by a long shot.