Why Whites Should Oppose Entitlement “Reform”

Donald Trump is now president, mainly because he promised to renegotiate trade deals and treaty obligations, build a wall on the southern border, and deport illegal immigrants. These positions enjoy immense public support, particularly among whites without a college degree. However, President Trump could betray those key supporters in two ways. He could fail to keep his promises on what were signature campaign issues. He could also do things he did not promise to do but that would hurt his supporters.

One of the worst things he could do to working-class whites would be to go along with GOP plans for changing Medicare and Social Security. Republican congressmen have been emboldened by the election, having retained control of both the House and Senate, and Speaker Paul Ryan has already talked about “entitlement reform.” There will be a battle over this, but Mr. Trump and Congress should leave Social Security and Medicare alone, and focus on trade and immigration.

Let’s look at who handed Mr. Trump his victory and why they would be hurt by “entitlement reform.” Mr. Trump won 58 percent of the white vote, only one point less than Mitt Romney, but this was in a race that had third-party candidates Gary Johnson, Jill Stein, and Evan McMullin who won modest shares of the white vote. Fifty-eight percent is therefore an impressive figure, but it is still not entirely the reason why Mr. Trump was able to win but Mr. Romney could not. Mr. Romney won 56 percent of white voters with a college degree, whereas Mr. Trump won only 49 percent—barely edging out Hillary Clinton. But Mr. Trump made up ground with whites who do not have a college degree, winning 67 percent of them compared to only 61 percent for Mr. Romney. So, while Mr. Trump did worse than Mr. Romney in Utah, Virginia, and California, he did far better in Ohio, Iowa, Michigan, Wisconsin, Florida and Pennsylvania. Mr. Romney lost every one of those states to Mr. Obama in 2012, but Mr. Trump flipped all six and won the election. Mr. Trump’s low support from college-educated whites was not enough to for him to lose states like Utah. President Trump won every state that Romney won in 2012, despite his deficiency among college-educated white voters.

 

Working-class whites support Social Security and Medicare for a simple reason—it is in their economic interest. They do not see them as undeserved “welfare,” because they have contributed to them throughout their working lives. These programs are commonly referred to as “pay-as-you-go,” meaning that today’s taxpayers fund the expenses of today’s retirees. From an actuarial point of view, the average beneficiary gets more out of Social Security and Medicare than he put in, even if interest on the contributions is included.

What this means is that younger people pay the costs for older people. This benefits whites because they are typically older than non-whites. The median age for whites is 43.3, whereas Hispanics, blacks, and Asians, have median ages of 28.7, 33.7, and 36.7, respectively. The difference is due to a large cohort of older white Americans, the Baby Boomers. Social Security and Medicare are therefore government transfer payments that benefit whites at the expense of non-whites, whereas most other forms of transfer payments shift tax dollars collected from whites into the pockets of non-whites.

Mr. Trump campaigned on a message of economic populism, decrying the loss of good-paying manufacturing jobs in the “Rust Belt.” Backing a proposal that would reduce the economic well-being of working-class whites would not only be betrayal but could even be political suicide.

Social Security and Medicare provide an additional benefit to whites because of their longevity. The life expectancy of whites is 78.9 years, whereas it is only 74.6 for blacks. Native Americans also have a lower life expectancy. Hispanics and Asians have higher life expectancies than whites, but they are only a small percentage of the elderly population.

A person can start drawing Social Security between the ages of 62 and 70, and most are eligible for Medicare at age 65. The “break even” point for most people—meaning the point at which they receive as much money as they have paid in—is typically around 77 or 78. This means that whites, on average, get more out of the program than they pay in, whereas blacks typically get less. A modification of Social Security and Medicare to benefit younger people would amount to creating yet another transfer program that gives money to non-whites at the expense of whites.

It is common to argue that the progressive effect of Social Security compensates blacks for their lower longevity. It is true that, just as the IRS taxes higher incomes at a higher rate than lower incomes, poorer people tend to get a greater Social Security benefit than wealthier people. This makes up, to some degree, for the fact that Social Security benefits largely depend on a person’s income throughout his working life, with people who make more money getting larger benefits. These benefits are capped at a certain level, however, limiting the return wealthy whites can get from Social Security.

Moreover, Social Security is not as progressive as the tax code: There is a cap on the payroll taxes that fund Social Security. The cap is indexed to inflation, but in 2017 it will be $127,200.00, which means income above that level is not subject to the social security payroll tax. If this cap were eliminated—one possible “entitlement reform”—whites would bear most of the increased burden, even though only about 10 percent of Americans earn more than that.

Other demographic factors also help to increase long-term benefits to whites. Recently arrived immigrant groups—particularly Asians and Hispanics—often do not receive Social Security benefits because they are less likely to have worked the requisite 10 years to qualify for retirement benefits. Their longer life expectancies therefore do not increase their payout.

Whites are also more likely than blacks or Hispanics to be married, and women tend to live longer than men. Social Security allows a surviving spouse to collect a dead spouse’s higher benefits. This means that white women often end up receiving extensive benefits even if they did not have high earnings themselves and paid little into the system. By contrast, fewer black women are married, so they get fewer survivor benefits. Blacks and other non-whites are more likely to get disability payments, but this does not make up the larger long-term benefits for whites. Overall, whites end up ahead of non-whites.

Social Security benefits the elderly over the young, regardless of race. Older non-whites benefit at the expense of younger non-whites, and older whites benefit at the expense of younger whites. A lot of younger whites, particularly those who are racially aware, may object to older whites receiving these disproportionate benefits, particularly since older whites have supported policies that have led to our dispossession.

This feeling is understandable. However, by subsidizing the present Social Security system, younger whites are helping to increase the estates of their parents and grandparents. Family members will be the most common beneficiaries of these estates. Even when people die intestate—without a will—inheritance laws still give preference to children and other close relatives, and much of this inherited wealth is not taxed. Since there are significantly more elderly white people than elderly non-white people, younger whites will get a larger benefit from the continuation of the present system.

This does not mean that the current system is working optimally. There are valid critiques of Social Security, but current reforms proposed by GOP legislators would result in transferring additional income to younger non-whites.

The GOP will not be the governing party much longer if it alienates working-class whites. These voters are fickle. They took a chance on Mr. Trump because he promised to bring back manufacturing and protect their incomes. The surest way to lose their support would be to pass legislation supported by Wall Street donors and their K Street allies.

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