Here's where Hillary needs to flip-flop: The tax hike she must reconsider to save Social Security

In 2008, Hillary was a fierce critic of raising taxes to fund Social Security. She should make a U-turn

Published April 16, 2015 11:59AM (EDT)

  (Reuters/Rick Wilking)
(Reuters/Rick Wilking)

Hillary Clinton’s 2016 campaign is damn near a week old now, and we’re still in that early phase of “tone” setting and message development that allows the candidate to steer safely clear of any sort of policy fight. Presumably Clinton has some idea of what sort of policies she’s going to roll out – she even told the Washington Post that not only does her team have a plan for campaign finance reform, but “we have a plan for my plan.” That’s a lot of plans! But for now we don’t get to know what they are.

Until such time as Clinton makes her policy agenda known, the rest of us are free to fire off suggestions for how we think the candidate and her team of campaign and policy advisers should do their jobs. It’s the stuff of punditry! Hooray for armchair quarterbacking. I’ve already offered my scorching take on how Hillary should approach climate change policy, and now I have a crazy idea for how she should tackle Social Security. Well, it's not that crazy, but it would be a big departure from Hillary’s 2008 position and would do much to tamp down some of the murmuring about her from restive liberals.

Social Security is going to factor hugely into the 2016 race and the Republicans have given Hillary and all Democrats a big, fat opportunity to hit the issue hard and campaign to expand one of the most successful and best loved government programs ever conceived. The Republicans in Congress enacted a rule change earlier this year that could imperil disability insurance benefits paid out through Social Security. The Republican candidates for the White House support plans that would cut benefits for future retirees, raise the retirement age, or partially privatize the program.

Hillary should and probably will lambaste each and every one of them, especially those who are calling for privatization. But she shouldn’t content herself with just beating up the GOP – she should also call for the cap on payroll taxes to be adjusted.

Right now, payroll taxes are only paid on the first $118,500 of income. That means the highest earners are contributing a smaller overall percentage of their income to Social Security than lower earners. Adjusting the cap so that more high earners pay more in payroll taxes would bring a bit more fairness to the funding structure and help shore up Social Security’s long-term finances.

Arguing for such an adjustment would, admittedly, be a bit awkward for Hillary, given her position on the issue during the 2008 race. Back then, it was Barack Obama calling for the payroll tax cap to be lifted, but exempting people making anything between $97,000 and $250,000 – the so-called payroll tax “donut hole” that would raise revenue for the program off the backs of high-earners while leaving the sacrosanct “middle-class” alone. Hillary criticized him mercilessly for this position. “I don't want to raise taxes on anybody,” she said during an April 2008 debate. “I'm certainly against one of Senator Obama's ideas, which is to lift the cap on the payroll tax, because that would impose additional taxes on people who are, you know, educators here in the Philadelphia area or in the suburbs, police officers, firefighters and the like.”

The problem was that criticizing Obama didn’t get her anywhere because she didn’t really have a proposal for what to do about Social Security’s long-term health. Instead of laying out a plan, Hillary said she would form a bipartisan "commission,” and the commission would figure out the plan. The only restrictions she put in place were that the commission could not cut benefits for current beneficiaries or raise taxes on the middle class.

So yes, embracing an adjustment to the payroll tax cap would open her up to charges of “flip-flopping,” and Republicans will attack her for wanting to raise taxes. But Republicans attack every Democrat for wanting to raise taxes, and there is lots of polling data suggesting that Americans will support an increase in payroll taxes to shore up Social Security and/or increase benefit payouts. Taking the “donut hole” approach and exempting earners beneath a certain income threshold would allow her to say she’s staying true to her commitment to not raise taxes on small businesses or the middle class. At any rate, it’d be a whole lot more compelling than the blue-ribbon-commission stuff from 2008.

And she’d be squarely within the mainstream of Democratic politics. Indeed, Obama's been calling (unsuccessfully) for the cap to be raised for years. Democratic senators have introduced legislation that would phase out the payroll tax cap entirely. Bernie Sanders, who is contemplating a run at the Democratic nomination himself, just recently issued a report backing the “donut hole” approach to raising the cap, arguing that “if we apply the Social Security payroll tax to income above $250,000, we could immediately bring in enough revenue to the Social Security trust fund to extend it for decades and also be able to increase benefits.” Martin O’Malley, another presumed 2016 aspirant, is also calling for expanding Social Security benefits.

There’s a new steel and determination on the left to reject the idea that Social Security needs to be “saved” through benefit cuts or rejiggering payout formulas. Democrats and liberals are already making the case that Social Security should be better funded and more generous, and Hillary should make that argument with them, regardless of what she’s said in the past.

By Simon Maloy

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