Yesterday, the Joe Biden campaign announced that he had selected Senator Kamala Harris as his running mate, and, taking into account both his age/rumors of ill health and the fact that Harris was herself a presidential candidate, her opinions matter more than in the usual case in which a vice-presidential nominee is more window-dressing.
(As to Biden’s life expectancy: assuming that he is in above-average health, he has a 10% chance of not surviving to the end of his term. As to dementia, even notwithstanding questions raised by his political opponents, the prevalence of dementia increases with age; there’s no convenient actuarial table but, across all OECD countries, the prevalence increases from 7% for individuals ages 75 – 79 to 12% for those 80 – 84, and 20% for those 85 – 89.)
So what positions has Harris taken, as a senator and a candidate? (Note that her campaign website now redirects to the Biden campaign site, but her original site is available through the Internet Archive/Wayback Machine; in any event there’s not much content there so it’s necessary to look elsewhere.)
Harris was one of the many Democratic candidates who pledged support for “Medicare for All.” Her particular version of the program would have covered “all medically necessary services” including vision, hearing, and dental, but, unlike Bernie Sanders’ plan, she does not directly promise that out-of-pocket costs and policy premiums will be eliminated. However, she suggested that consumers might purchase “supplemental insurance covering services not included in Medicare, such as medical insurance for traveling abroad, or cosmetic surgery” — but given that the largest role that Medicare supplement policies play today is covering Medicare copays and deductibles, this implies that they will be eliminated. In fact, other reporting cited a plan to cap out-of-pocket costs at $200. (Also: no insurance company would cover cosmetic surgery, any more than they do now.) In any case, she separately suggests that private insurance would still exist in a form similar to existing Medicare Advantage plans, though without many details.
Harris further intended to fund the plan in largely the same manner as Sanders: an “income-based premium paid by employers” (e.g., a FICA-type tax), as well as “higher taxes on the top 1%, taxing capital gains at the same rate as ordinary income, among others” and “more progressive income, payroll, and estate tax.” She would also “tax Wall Street stock trades at 0.2%, bond trades at 0.1%, and derivative transactions at 0.002%” — a move she claims would hit “investors and big banks” but, as MarketWatch wrote, would impact ordinary retirement savers every bit as much:
“The Securities Industry and Financial Markets Association, a trade group, wrote up an analysis of what it calls ‘financial transaction tax,’ in June. Among other things, SIFMA points out that ‘a typical mutual fund investor will have to save an additional $600 per year (a 12% increase in savings) or work an additional two years over their career to achieve his/her retirement goals’ if the tax were 0.1% — and more if the tax were higher.”
Harris is also a supporter of substantial Social Security tax and benefit increases, as a sponsor of the 2019 “Social Security Expansion Act” (See the Harris press release, fact sheet, and bill text for details.) That bill would have
- Added into the basic Social Security benefit computation an extra across-the-board 15% increase;
- Changed the inflation measure used to the CPI for the Elderly (see here for details about this proposed change and why it’s not as straightforward as it might appear);
- Increased the minimum benefit for those credited with 30 years of work to 125% of the single-person poverty level, as of 2020, increased each year afterwards by average wage increases in that year, with proportionate benefits for those with less than 30 years;
- Restored children’s benefits up to age 22 for students;
- Added a special tax on all income (wage and investment income) above $250,000, with no indexation provisions so that “bracket creep” would eventually eliminate the Social Security earnings ceiling entirely; and
- Merged the currently-separate Old Ages/Survivors’ and the Disability Insurance trust funds.
Notably, the fact sheet observes not that these changes would permanently remedy the risk of insolvency; instead, the increase in benefits is substantial enough that the fund would still be expected to reach insolvency, although in 2071 rather than 2035.
Before Harris was a candidate, back in 2018, she proposed legislation she called the “Rent Relief Act.” (Readers who, like me, are driven batty by legislation titles crafted solely to spell out a clever word or phrase will be relieved to know that “Rent Relief” is not an acronym for anything.) This legislation would have called for the federal government to pay 100% of rent and utilities exceeding 30% of income, up to 150% of the HUD-defined Fair Market Rent, for the lowest earners, with up to $25,000 in income, stepping down to 25% for those with up to $100,000 in income. The bill stood at a mere 4 pages of text, and produced such an unworkable system that a college student could have enjoyed a palatial residence.
Subsequently, she proposed the LIFT the Middle Class Act — yes, this one has an acronym-ized title that’s even worse than most: as the legislation text says, “This Act may be cited as the ‘LIFT (Livable Incomes for Families Today) the Middle Class Act.’” That legislation would have provided $250 per month per adult, with a phaseout starting at $30,000 for singles, $60,000 for couples, and $80,000 for single parents. For the very lowest earners, the credit would serve as a match on earned income until they reach the $250 per month level. As explained at the Committee for a Responsible Federal Budget, Harris proposed paying for this by eliminating the Trump tax cuts, except to the extent that they benefit those earning less than $100,000; their analysis found that this would only “pay for” the new benefit if the Trump tax cuts were removed but the pay-fors in the TCJA, such as the SALT (state and local tax) deduction, were retained.
And finally, back in May, Harris was one of three senators to propose a very aggressive “stimulus” bill in response to the pandemic. As I wrote at the time, they proposed monthly direct cash payments of $2,000 per adult, $2,000 per child for up to three children, retroactive to March and continuing until three months after the pandemic is officially declared over. All individuals with incomes below $120,000 would have been eligible. I cannot emphasize too much how large these sums of money are; the $10,000 payable to a married couple with three children would be twice the median household income on an annualized basis. My calculations using government data on income and demographics suggested this would amount to an outlay of $6 trillion on an annualized basis — that’s 135% of the total government spending in 2019, and 28% of the 2019 US GDP (annualizing for comparison’s sake or assuming the payouts extend for a year). And, of course, that’s on top of all other forms of government spending, from healthcare to defense.
No one really knows how much money the government can borrow, or, as is increasingly the case, borrow from itself via money-printing, before it triggers inflation. I don’t hold myself out as an expert on this subject. But as someone who corresponds with readers regarding their employers’ pension lump sum offers, and someone who bears responsibility for my own parents’ finances, and having my own personal collection of Weimar Republic 100 million-mark bills purchased at a German flea market, I can only say that it worries me to see the inevitability of low inflation being taken for granted, when it is retirees who will be hardest hit if the seemingly-perpetual low inflation disappears. And consequently, Harris’s seeming instinct to spend expansively worries me.
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