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Government can play a role in helping Americans save for retirement. Policy tools range from offering incentives, such as tax breaks for contributions or for setting up a plan, to providing consumer protections for retirement plan participants. Congress and the Obama administration have proposed approaches to increase retirement savings, but no major federal legislation has passed on this issue since 2006.3 That inaction has led state policymakers to look for opportunities to fill the gap.

Since early 2012, over half of the states have introduced legislation to set up or study options for state-sponsored retirement savings programs for workers at private sector or nonprofit employers that do not offer plans.4 Illinois, Massachusetts, Oregon, New Jersey, and Washington have enacted state programs.

Why the US Government Shouldn’t Use Social Security to Pay Parental Leave Benefits

Problematic Use of Social Security

Accordingly, the upfront costs of the paid leave program will essentially accelerate the Social Security Trust Funds’ exhaustion date. Based on the costs estimated in this analysis, however, it will not substantially accelerate that date. Rather, it would likely advance the exhaustion date by about six months, with this estimate subject to a great deal of uncertainty. This accelerated exhaustion is driven by reductions in net interest income from the higher upfront costs, which leaves the Trust Funds with reduced assets than would have otherwise been the case. From 2019 to 2034, the leave proposal would add $226.2 billion in costs to Social Security prior to the Trust Funds’ exhaustion. To the extent that Social Security is in a cash flow deficit, all new costs would reduce net interest income to the Trust Funds, reductions which would compound over time.

The proposal, however, would not work so well in practice because of Social Security’s troubled financial outlook. Social Security already runs a cash deficit and its Trust Funds are projected to go bankrupt by 2034. Under the IWF proposal, the vast majority of workers who claim paid leave benefits would retire after 2034 and would not offset the cost of their leave until Social Security has already gone bankrupt. Consequently, the paid parental leave benefit would add $226.2 billion in new costs to the Social Security Trust Funds prior to exhaustion (financed by federal borrowing) and modestly advance the Trust Funds’ depletion.

Should new parents be allowed to tap Social Security to fund parental leave benefits?

Sens. Marco Rubio, R-Fla., and Mitt Romney, R-Utah, reintroduced last September the New Parents Act, legislation that would allow new parents up to three months of parental leave benefits, drawing the funds from their Social Security retirement benefits.

A trio of retirement experts said it's not the right approach. "This type of parental leave bill would undermine retirement security," Alicia Munnell, director of the Center for Retirement Research at Boston College, said in an email. Social Security is already cutting benefits back as the program's full retirement age increases to 67. Plus, many people have modest to no 401(k) savings, increasing their reliance on Social Security benefits. "Workers are simply not in a position to give up future benefits from Social Security," Munnell said. Instead, Munnell favors some type of caregiver credit, either by increasing the number of work years excluded from Social Security benefit calculations, or giving earnings credits to parents who take time out of the workforce for caregiving. "Either one of these ideas could be paid for by some modest reduction in benefits for higher-income workers, not by forcing all women to take a reduction in their retirement benefits to get paid leave," she said. Cindy Hounsell, president of the nonprofit Women's Institute for a Secure Retirement, said the proposal did little to ameliorate the gender gap women face. "It is essentially an unpaid leave bill since you are using retirement money to pay for unpaid caregiving," she said. Hounsell also favors giving women extra retirement credits for giving birth—or to those who leave work to care for elderly parents or a partner. Olivia Mitchell, a professor of insurance and risk management and business economics and public policy at the Wharton School of the University of Pennsylvania, was more succinct: "It is a terrible idea," she said in an email. "Social Security is already facing insolvency such that benefits will need to be cut 25% to 30% soon." The trust fund for Social Security is projected to run out of money in 2034, with most expecting benefit cuts for future retirees.

As concern grows about the financial security of future generations of retirees, justifying programs that divert resources from retirement is difficult. In the coming decades, the share of workers entering retirement with traditional employer-sponsored pensions that provide a guaranteed income stream will continue to shrink. The majority of workers will have access to employment-based retirement accounts through which they can save for their old age, but many people dip into these savings during their working lives to meet current financial needs, leaving less for retirement (Argento, Bryant, and Sabelhaus 2014; Bryant, Holden, and Sabelhaus 2011; Munnell and Webb 2015). As mortgage refinancing becomes more popular, more people are entering retirement with outstanding mortgages, forcing them to spend some of their retirement income on mortgage payments (Butrica and Mudrazija

2018). Rising out-of-pocket spending on medical care and long-term services and supports represents another drain on retirees' resources (Favreault and Dey 2015; Hatfield et al. 2018). Johnson and colleagues (2018) concluded that Gen Xers and millennials will be less able than previous generations to maintain their preretirement living standards when they stop working. Any Social Security benefit cuts that might be made to close the system's long-term financing gap would further darken the financial outlook for future retirees.

The idea of a budget-neutral paid leave program is appealing. However, there is one big problem: Social Security is already financially distressed. The most recent trustees report shows that the program will start dipping into the trust fund in 2018 , meaning Social Security will take in less cash than it will pay out as benefits, thereby depleting the reserves. Unless Congress takes action to strengthen the program’s finances, the trust fund will run out in 2034, 16 years from now . Given Social Security’s dire financial outlook, why should we impose the paid leave benefit onto a plan that is only financially viable for 16 years, knowing that some kind of reduction in Social Security benefits would be inevitable? In addition, although early parental leave collection would be optional, young working families with retirement ages that occur after 2034, when the Social Security trust fund runs out, would have strong financial incentives to collect early, regardless of need. This scenario would further exacerbate the fund’s precarious financial position.

Using Social Security to finance parental leave benefits raises fundamental questions about the Social Security system itself. It was designed as a social insurance program to provide basic retirement income and insure people against the financial risks associated with becoming widowed, orphaned, or disabled. Allowing people to borrow against their future retirement benefits to meet needs at younger ages would fundamentally change the program from a social insurance program to a forced saving program. Allowing people to use future Social Security benefits to finance parental leave could invite proposals to use the program to meet other pressing needs. Representative Tom Garrett (R-VA), for example, has proposed that people could pay off part of their student loan debt by accepting reduced future Social Security benefits. Diverting Social Security to cover nonretirement needs could significantly erode retirement security.

Participants in the parental leave program would have to forfeit future Social Security retirement benefits for longer than they collected paid leave because interest would accumulate on their implicit loan for decades. The implicit interest rate charged by the program would be much lower than available private market rates (if new parents could obtain a private loan at all) because interest earned by the Social Security trust funds is tied to the low interest rates for long-term government bonds. However, because most people have children in their twenties and thirties and collect Social Security in their early sixties, interest on the leave loan would accrue for 30 or more years. Covering paid leave for the roughly one-quarter of parents who would be unable to reimburse Social Security because of disability, premature death, or inadequate employment histories adds to the costs. Our estimates would be even higher if Congress reduces scheduled Social Security benefits to close the program's long-term financing gap.

For participants born between 1991 and 2000, annual benefit cuts would average $430 in 2018 inflation-adjusted dollars if the program permanently reduced their Social Security benefits (table 6). Cuts would be applied for an average of 25 years. Fathers who participate in the program would forfeit more Social Security retirement benefits than mothers, consistent with their average higher leave benefits. Participants who take multiple paid leaves would also forfeit more retirement benefits than those who take only one paid leave. Benefits would be reduced by $1,310 for those with four paid leave spells compared with only $340 for those with one paid leave spell. Estimated median benefit losses are somewhat lower.

The world is in the middle of a dramatic demographic transition caused by increasing lifespans and falling birthrates.

One consequence of this change is that traditional tax-and-transfer, pay-as-you-go retirement schemes (such as Social Security in the United States) are basically bankrupt.

The assumption that there is an upper limit on the number of jobs in an economy—the “lump-of-labor fallacy”—has no theoretical justification; nor is there empirical evidence to support such a view. In fact, as economies become more complex and grow due to specialization, additional jobs are being created. Technological progress, while rendering some occupations obsolete, constantly creates demand for new occupations. Research shows that having older people active and productive actually benefits all age groups and spurs the creation of more jobs. A 2012 analysis of Current Population Survey data tested for changes in employment among US workers under the age of 55 when those aged 55 and older worked in greater numbers [3]. The study found no evidence that younger workers lost work; in fact, it found the opposite: greater employment, reduced unemployment, and higher wages. Another example of this effect is seen in the expansion of the employment of women during the second half of the 20th century in OECD countries: women did not replace men in the workforce; on the contrary, the transition to two-earner families increased disposable income, created new demand, and prompted firms to hire more workers. (It could be argued that in the very short term the number of jobs was fixed, because it takes time for this virtuous cycle to operate. However, it is known from a vast literature that there is an impressive amount of simultaneous job creation and job destruction, which stresses that even in the very short term the number of jobs is not limited.) Are young workers substitutes for older workers? If firms faced higher labor costs following an increase in the retirement age (e.g. because seniority decreases the profitability of older workers), they could substitute younger workers for older workers. Economic theory suggests that any substitution of one type of worker with another is governed by the similarity of the skills they possess. Empirical evidence, however, suggests that even workers of similar skills who differ by as little as five years in age are already imperfect substitutes, suggesting that firms would have, at most, a limited ability to substitute young workers for older ones [4]. As a consequence, the hiring behavior of firms in response to the cost of older workers indicates that substitution between young and old workers is limited. Even when the cost of employing older workers is significantly increased, the substitution of older with younger workers is moderate in scope [5]. Skill-based technical change might further decrease the substitutability between workers of different age cohorts. Technical change constantly adjusts the demand for skills. Although many jobs can now be more cheaply undertaken by computers, the demand for higher levels of skills (e.g. software engineers) has increased. However, learning new skills is costly and older workers may not invest in acquiring new skills if their remaining working life is too short to recoup the costs. In contrast, younger workers will more readily learn new skills because the period over which they can recover their costs is longer. Studies of US data indicate that the sector-specific rate of technological progress leads to more unemployment and the early retirement of older workers [6]. With older workers more likely to exit the labor market under these circumstances, rapid technological change makes the possibility of substituting younger workers for older ones even less likely.

A core element of Bernie Sanders's Social Security plan — and indeed all progressive reform proposals — is eliminating the limit on earnings used to levy taxes and calculate benefits. Since Social Security's creation in 1935, both payroll taxes and benefits have been calculated on earnings up to a "cap." Currently, individuals pay taxes on their first $127,200 in earnings, and those same earnings are plugged into Social Security's benefit formula to calculate the benefits they will receive in retirement. Eliminating the payroll-tax ceiling would, all other things being equal, increase the effective top marginal tax rate on earned income by 12.4 percentage points as well as raise the benefits paid to high earners once they retire.

The payroll-tax ceiling was put in place at Social Security's origin for a reason: It established Social Security as a social-insurance program, in which everyone paid taxes and received benefits in some reasonable proportion, rather than a "welfare" program in which most taxes are paid by one group while most benefits are received by another. In fact, the Committee on Economic Security appointed by Franklin Roosevelt to draft his Social Security plan recommended that individuals earning above $3,000 — about $145,000 in terms of today's wage distribution — be exempt from Social Security taxes and not participate in the program. That is, the committee recommended that Social Security contain no redistribution from very high earners to lower earners.

A debt crisis would limit the federal government’s ability to rollover debt—much less to increase debt to finance existing benefits. While Greece and Spain have experienced a debt crisis, an economy in a deep recession, the imposition of austerity programs, and civil unrest, they have had the European Union and the IMF provide financing to buy them time. If the U.S. encountered a debt crisis, it’s unclear whether other countries would provide interim financing. Even if other countries wanted to assist the U.S., they might not have the capacity to do so. The Greek economy, for example, amounts to about $300 billion annually—compared with a $16 trillion U.S. economy. In other words, the federal-budget deficit for the first two months of this year amounted to $292 billion, enough debt to finance the entire Greek economy for a year.

Public finance is critical to national security. In a debt crisis, the federal government’s ability to finance its military could be compromised. Though defense spending has been declining as a share of the federal budget, the U.S. was also engaged in war during the financial crisis. As the federal government was responding to the financial crisis, President Obama also ordered the surge in operations for the War in Afghanistan on December 1, 2009. Though the cost of the surge of $35 billion was relatively small, history shows that a country’s ability to finance its military is critical to success on the battlefield. In The Ascent of Money, Niall Ferguson attributes Wellington’s victory over Napoleon to the British’s ability to borrow funds.20

In that regard, it’s important to recognize the US is still considered to be the most powerful country on the planet. The cruel reality is that we live in a world where being the preeminent military power is essential for our security, and I think most Americans understand this instinctively, and want the US to remain in the lead.

I’m convinced that this is why a new Politico poll shows most Americans want more spent on national defense. As to humanitarian aid to other countries? 45 percent wanted less spent, while only 16 percent wanted more and just 27 percent wanted the same amount spent. Of course, many Americans may overestimate how much is spent on foreign aid, but I also wonder how many of its supporters genuinely understand it. For example, around 40 percent is dedicated to selling weapons overseas and “building armies.” We can, I think, all agree that we need an informed national discussion about foreign aid, but until that takes place, I can understand some pulling back as we evaluate its value.

Most people realize that America’s $22 trillion debt is a problem. After all, that money—or at least the interest on it—will have to come out of workers’ paychecks, leaving them with less money to spend on everything else. Much less recognized are America’s hidden pension, or retirement, debts. That hidden debt is the money that workers across the country have been told they will receive in retirement—money that, all too often, simply is not there. Social Security is the most obvious of America’s pension debts. The program has $13.9 trillion in unfunded obligations over the next 75 years. Fifteen years from now, when its notional trust fund runs dry, all retirees will receive about a 25 percent benefit cut. For the average Social Security recipient, a loss of $4,200 per year in income would be a significant financial hit. Unfortunately, the retirement outlook is drastically worse for private union workers and state and local government employees. On average, their pension funds are only 43 percent and 35 percent funded, respectively. Multiemployer pensions have promised $638 billion more than they’ve set aside to pay their retirees. State and local pension plans are short between $4 trillion and $6 trillion. A private union member with a $24,000 pension, could lose $14,000. State and local workers could be even worse off. Some of those funds have mere pennies on the dollar on hand to pay promised benefits. If Congress doesn’t act to improve Social Security and multiemployer pensions, benefit cuts kick in. But if state and local policymakers fail to reform their underfunded pensions, taxpayers will almost certainly pick up the tab because, in most states, retired workers receive their pensions before active workers get paid. The pension-tax-hikes won’t be small. On average, pension underfunding amounts to between $12,200 and $18,300 per resident. Such high tax increases could send some states into an economic death spiral. In Illinois, California and Connecticut, for example, per-capita unfunded pension burdens are $29,000 or higher. That’s about $120,000 in additional taxes for a family of four. Relying on tax increases alone to cover state and local pension shortfalls would almost certainly cause workers and businesses to flee the high-tax states, leaving them with an even smaller revenue base to pay for their unfunded pensions. Relying on tax increases—through Congress’s proposed bailout—to shore up private union pensions would wrongly penalize taxpayers and the majority of companies that do not participate in union-run pension plans Similarly, relying on tax increases to shore up Social Security would dampen our economy and lower working families’ incomes. An analysis by Drew Gonshorowski and I shows that workers of all income levels would be significantly worse off if Congress relies on tax increases to solve Social Security. And this is true even if Congress also raises Social Security benefits. Moreover, the economy would suffer significantly if policymakers rely on tax increases to solve Social Security’s shortfalls. Researchers at the University of Pennsylvania’s Wharton School of Business looked at two proposals to address the problem: the Social Security 2100 Act, which would raise Social Security taxes and benefits, and a more targeted reform that included cost-saving measures such as gradually raising the retirement age, reducing benefits to well-off retirees, and lowering cost-of-living adjustments. They found that the economy would be 7.3% larger with the latter, smaller Social Security program. How is that so? As former Social Security Principal Deputy Commissioner Andrew Biggs explains: “The logic is straightforward: when taxes go up people work less; when Social Security benefits go up, people save less. If people work less and save less, the economy grows more slowly. America’s largely hidden and yet-to-be fully realized retirement income shortfalls are on par with the size of our country’s public debt. While the consequences of failing to recognize and address those massive deficits would be devastating—for retirees, workers, and the entire economy—the good news is that there are solutions. And those solutions—the economically constructive ones—do not include bailouts, massive pension losses, or tax increases. Commonsense changes to union pension plans can prevent employers and unions from breaking their pension promises, and a properly-managed pension insurance agency can minimize pension losses. State and local governments can overcome the inherent conflict between short-sighted political interests and long-term pension promises by shifting to defined-contribution retirement benefits that require immediate funding. Americans can cushion potential retirement shortfalls by capitalizing on improved health outcomes and life expectancies that mean most individuals can work years longer than previous generations. And Congress can return Social Security to its original roots by shifting benefits from upper-income earners to lower-income earners while letting everyone keep more of their hard-earned paychecks.

The end of the Cold War marked the United States’ progression into the sole rules-maker and -enforcer for the world. Several factors contributed to America’s ascension to this role—military power, alliances, liberal values, a large population, and a cultural willfulness (at least for a time) to be the global hegemon. All of these factors were important. A primary reason America became the hyperpower with the ability to enforce international rules was economics. Our dynamic economy was a good reason for other countries to be allied with us. It incentivized peace. And—most importantly—our economy created enough wealth to support the most fearsome military in the history of the planet. That was then. Today, America is still digging out from the financial crisis of 2008. This economic shock resulted in the enactment of many irresponsible policies—including drastic cuts to the military. But military budgets can be restored, so long as there is money in the treasury. The Republican tax cut of 2017 succeeded in goosing the macro economy—but at the cost was America’s long-term fiscal solvency. And, by total coincidence, as America’s financial indiscretions have mounted, resulting sequestration policy which caused military budget cuts, China, Russia, Iran, and Saudi Arabia have moved to challenge the international order, an order that the United States is its biggest beneficiary. Consider this: For the first time in peacetime, America’s debt-to-GDP rate has exceeded 100 percent. The primary reason for this explosion of debt is non-discretionary expenditures—Medicare, Medicaid, and Social Security—and continuing tax cuts. By now everyone is familiar with the insanity of government spending under Trump: As a candidate, he promised to eliminate the national debt in 8 years. Instead, he has set new records for widening our budget deficits. And even the White House’s own (totally unrealistic) scenarios can’t envision reduction of the national debt. It’s not hard to see where this all leads: Eventually non-discretionary spending and higher interest rates crowd out discretionary spending. And one of the easiest things to cut is military spending which is the biggest discretionary item in the budget. This presents a problem that other nations do not face. Most countries carry national debt. But world peace does not rely on their financial stability. If Mauritius has a debt crisis—their current debt per capita is $148,000 for every man, woman, and child—no one has to worry about the trade routes in the South China Sea. Which is why, ultimately, fiscal responsibility is a national security issue. The more our debt forces us to cut military spending, the further we will be pushed from our position as global hegemon, and the more other nations will attempt to challenge global norms in order to shift them in their favor. These norms include secure trade lines and the sovereignty of smaller nations. In recent years, the United States has been forced to choose between preserving these norms and risking escalation to war—for instance, with the Chinese building of artificial islands, Russia’s annexation of Crimea, and Iran’s interventions in Syria and elsewhere. American presidents have struggled with these choices. But at least they had choices. And this fact had an inhibiting effect on aggressor nations. At some point our fiscal problems may make it so that America doesn’t even have a real option. At which point Russia, China, and other bad actors will be unbound by anything but their own ambitions. Presidents always seem to understand how important the national debt is right before they take office. Candidate Obama called President Bush unpatriotic for significantly increasing the national debt. President Obama doubled that debt during his term. Candidate Trump kicked off his campaign by talking about the national debt. President Trump has grown it at record pace. Deficit reduction is hard. We have grown used to a government that gives more things away with each passing year. Cutting the deficit means taking some of those benefits away. It’s telling that Candidate Trump made two contradictory promises: (1) That he would eliminate the debt in 8 years. (2) That he would not cut Medicare and Social Security, because they benefit the largest demographic of the electorate, which became his base. There was no way to keep both of them. You can guess which one he chose to honor. It’s hard to blame Trump. This has the been the posture of every president since the turn of the century: They make noise about the dangers of debt and then refused to reform the two programs most responsible for driving our debt. Debt reduction is simple, but not easy. It requires less spending and more revenue. But more, it requires a great deal of political will and leadership which seems to be lacking in the two elected branches of the federal government. At some point, someone will have to take one for the team and make the hard cuts. For people who hoped President Trump would be a reformer, it’s a disappointment that he didn’t use his straight-talk, unfiltered persona to tell these hard truths. Because maybe he could have been the president to make it work. An America facing a debt crisis will have to make very difficult compromises and disruptive adjustments that will change the comfortable and safe world we and our allies live in, disruptive adjustments that will make it very difficult for our allies to trust us to lead them again. Before becoming Secretary of Defense, James Mattis talked about the national debt as the greatest national security threat to the United States, including during his confirmation hearing. He was right. Maybe the next president will heed his warning.

According to the Social Security Administration, approximately 56 million people depend on Social Security (OASI) for their retirement. For about half of older adults, it provides at least 50% of their income, and for one in four older adults, it provides at least 90% of their income. In addition, it offers social insurance protection to workers who become disabled and to families whose breadwinner dies.

In July, the Social Security Board of Trustees reported that Social Security benefits will be depleted by 2035. Because Social Security has been a cornerstone of economic security for almost 90 years, its financial challenges are disconcerting. If the trust funds are depleted, benefits would be reduced by 20%.

SOCIAL SECURITY FINANCES: PRESENT AND FUTURE Social Security is mostly a pay-as-you-go program — that is, current benefits are financed largely by current payroll taxes. Of the $1.1 trillion in annual program costs in 2020 (98% of which are paid in benefits), almost 90% was covered by payroll taxes, approximately 3% was covered by taxation of the Social Security benefits transferred from the general government account to the program, and over 7% was covered by interest earned on the bonds held in the combined retirement and disability trust funds paid by the federal government. Yet according to the Social Security trustees, the trust funds began to shrink in 2021 — and by 2034, they will be exhausted. At that point, payroll taxes and taxes on benefits will only be able to pay 78% of program costs. The projected shortfall over the next 75 years is 3.54% of payroll, up from a 2.66% deficit in 2016. The cost of the program is also projected to increase, from the current 5% of GDP to more than 6% by 2080, while non-interest income remains essentially flat, at about 4.5% of GDP. Although long and covering three or so generations, the 75-year horizon is arbitrary, and it cuts off additional years of deficit as well as future generations. The trustees, therefore, also calculate the shortfall over an infinite time horizon. On that basis, the deficit is now at 4.6% of payroll — up from 4% in 2016. The program represents a considerable drain on the federal government's finances. Since 2010, Social Security has paid out more in benefits and expenses than it has collected in taxes and other non-interest income. This drain is projected to grow from about 2% of taxable payroll in the 2020s to about 3.5% in the year of program insolvency, and to almost 5% by around 2075 if scheduled benefits continue. The recent pandemic-induced recession hit Social Security especially hard, increasing the deficit and drawing the insolvency date forward by a year, to 2033. The Concord Coalition recently produced some insightful analysis on the implications of Social Security's worsening finances for the federal government. According to the coalition, as the trust funds approach exhaustion and the federal government redeems its bonds to continue to pay Social Security benefits, publicly held debt will increase as a result — by almost $6 trillion by 2035. Even with today's unprecedented public-debt standards, that increase represents a large burden: about 15% of the year's projected GDP. In terms of interest cost, the added annual burden on public finances grows to almost 1% of GDP. Although there are many reasons for this grim state of affairs, the demographic challenge is a primary driver. The number of retired workers is projected to double in about 50 years as members of the post-World War II Baby Boom generation continue to retire in increasing numbers. People are also living longer, while the birth rate has dropped in recent years. As a result, the trustees project that the ratio of 2.7 workers paying Social Security taxes to each person collecting benefits in 2020 will fall to 2.2 in 2039 — and slide further thereafter. Even this sober assessment may be too rosy, because the trustees assume that the birth rate will increase to 2.0 children per woman in their intermediate scenario. In reality, the rate has fallen from over 2.0 in the mid-2000s to 1.65 in 2020. While some of the decline may be temporary as women postpone childbearing, strong survey evidence and analysis by researchers at Boston College indicate that most, if not all, of the fertility slide is permanent. For example, surveys of the total births expected among women ages 20 to 24 show a decline from 2.46 in 1982 to 2.09 between 2017 and 2019. Further analysis finds a gap of about 0.45 children between projected completed fertility and expectations of fertility at younger ages. All this points to a more reasonable projection of a future birth rate closer to 1.65 (the current rate), rather than the trustees' projected rate of 2.0. As a result, the long-run finances of Social Security are much worse than the trustees project.

Drones, kill lists, computer viruses and administration leaks are all the rage in the current political debate. They indeed merit serious scrutiny at a time when the rules of war, and technologies available for war, are changing fast. That said, these issues are not the foreign policy centerpiece of the 2012 presidential race. Economic renewal and fiscal reform have become the preeminent issues, not only for domestic and economic policy but for foreign policy as well. As the former chairman of the Joint Chiefs of Staff, Adm. Michael G. Mullen, was fond of saying, national debt has become perhaps our top national security threat. And neither major presidential candidate is doing enough about it. This issue needs to be framed as crucial not just for our future prosperity but for international stability as well. The United States has been running trillion-dollar deficits, resulting in a huge explosion in the country’s indebtedness. Publicly held debt now equals 70% of gross domestic product, a threshold many economists consider significant and highly worrisome. Making matters worse, half of our current deficit financing is being provided by foreigners. We are getting by with low interest rates and tolerable levels of domestic investment only because they find U.S. debt attractive, which may not last. According to the nonpartisan Committee for a Responsible Federal Budget, President Obama’s long-term budget plan would allow publicly held debt as a fraction of GDP to rise further, up to 75%, within a decade. Mitt Romney’s proposal, featuring tax cuts and defense spending increases and as-yet-unspecified (and thus less than fully credible) entitlement reform, appears worse. It would probably drive publicly held debt to 95% of GDP over the same period. Put differently, though both are serious and pragmatic men, neither major party’s presidential candidate is adequately stepping up to the plate, with Romney’s plan the more troubling of the two. Why is this situation so serious? First, we are headed for a level of debt that within a decade could require us to spend the first trillion dollars of every year’s federal budget servicing that debt. Much less money will be left for other things. That is a prescription for a vicious cycle of underfinancing for our infrastructure, national education efforts, science research and all the other functions of government that are crucial to long-term economic growth. Robust defense spending will be unsustainable too. Once we get in this rut, getting out will be very hard. Second, such a chronic economic decline would undercut what has been 70 years of strong national political consensus in favor of an activist and engaged American foreign policy. One reason the United States was so engaged through the Cold War and the first 20 years of the post-Cold War world was fear of threats. But the other reason was that the strategy was associated with improvements in our quality of life as well. America became even more prosperous, and all major segments of society benefited. Alas, globalization and automation trends of the last generation have increasingly called the American dream into question for the working classes. Another decade of underinvestment in what is required to remedy this situation will make an isolationist or populist president far more likely because much of the country will question whether an internationalist role makes sense for America — especially if it costs us well over half a trillion dollars in defense spending annually yet seems correlated with more job losses. Lastly, American economic weakness undercuts U.S. leadership abroad. Other countries sense our weakness and wonder about our purported decline. If this perception becomes more widespread, and the case that we are in decline becomes more persuasive, countries will begin to take actions that reflect their skepticism about America’s future. Allies and friends will doubt our commitment and may pursue nuclear weapons for their own security, for example; adversaries will sense opportunity and be less restrained in throwing around their weight in their own neighborhoods. The crucial Persian Gulf and Western Pacific regions will likely become less stable. Major war will become more likely. When running for president last time, Obama eloquently articulated big foreign policy visions: healing America’s breach with the Muslim world, controlling global climate change, dramatically curbing global poverty through development aid, moving toward a world free of nuclear weapons. These were, and remain, worthy if elusive goals. However, for Obama or his successor, there is now a much more urgent big-picture issue: restoring U.S. economic strength. Nothing else is really possible if that fundamental prerequisite to effective foreign policy is not reestablished.

It’s rare when news that a major government program facing $20 trillion in deficits is greeted by demands to expand that very program. And yet that’s how the 2022 Social Security Trustees Report, released on June 2, was received, with progressive politicians and activists calling to increase benefits. But the biggest obstacle to expanding Social Security isn’t congressional Republicans but President Biden himself, who opposes the payroll tax rate increases that progressive Social Security plans depend upon. Biden’s stance opens the door to sensible bipartisan solutions. Social Security is the largest federal spending program, levying the largest tax most workers pay and providing the largest source of income to most retirees. The 2022 Trustees Report projects that Social Security is underfunded by 20 percent over the long term, with its trust funds running dry in 2034. There is no magic solution, just the unpalatable choice between higher revenues and lower benefits. Congressional Democrats have seemingly reached a consensus: Social Security reform should consist not of 100 percent tax increases, but of more than 100 percent. The Social Security 2100 Act, co-sponsored by 89 percent of House Democrats, would increase taxes to pay full scheduled benefits, then raise taxes even further to boost benefits for all retirees. Tax increases would be split roughly equally between phasing out the $147,000 maximum salary subject to payroll taxes and ramping up the payroll tax rate from 12.4 percent to 14.8 percent. Republicans object to Social Security tax increases for both economic and philosophical reasons. But since the failure of George W. Bush’s 2005 reform effort and even more so following President Trump’s election, the GOP avoids endorsing the benefit reductions needed to avoid these tax increases. But progressives face an even more important roadblock: President Joe Biden, who pledges that “nobody earning less than $400,000 a year will pay an additional penny in new taxes. Nobody.” This leaves Congressional Democrats in a fix: without payroll tax rate increases the Social Security 2100 Act adds just five years to Social Security’s solvency, making it not even the 2040 Act. But President Biden’s stance may actually make Social Security reform more likely. The reality is that nothing like the Social Security 2100 Act can pass. Neither would a comparably-conservative Social Security reform. George W. Bush, holding the presidency and Congress, could not pass a Republican-only Social Security plan. Barack Obama, with overwhelming Congressional majorities, passed the Affordable Care Act only by the skin of its teeth. The U.S. political system’s checks and balances simply make passing any significant partisan legislation exceedingly difficult. As James Madison said, the U.S. political system is built on “compromise, compromise, compromise.” The sooner we get there the better. Progressives will have to accept benefit cuts. But that’s easier to do than they might imagine. According to my calculations of Social Security Administration data, the average new retiree in 2020 received a benefit 32 percent higher than 20 years prior, even after inflation. Moreover, Social Security’s benefits are particularly generous for high earners. In 2021, the maximum Social Security benefit was $37,881 annually, compared to $11,456 in New Zealand, $13,150 in Australia, $11,608 in Canada, and just $11,141 in the United Kingdom. It’s hard to argue that no savings can be had from benefits. And yet restraining benefits won’t be enough, either financially or politically. Conservatives will have to swallow some tax increases, but some creativity may be required. One idea is to limit the federal tax preference for retirement plan contributions and redirect the savings to Social Security. The Congressional Budget Office estimates a roughly $275 billion annual cost of the retirement tax preference, which would be enough by itself to fill the 75-year Social Security deficit. Yet many economists question how effective the tax preference is in encouraging retirement savings. That job could be left to far cheaper policies such as providing universal access to workplace retirement plans and automatically enrolling employees. The U.S. does not need to endlessly increase Social Security benefits, even as retirement savings reach record highs and poverty in old age falls to record lows. Nor should it spend massive amounts subsidizing retirement savings by high earners who would save regardless. But the U.S. does need to maintain a robust safety net against poverty in old age and to ensure that every employee has a retirement plan at work. All of this can happen if members of Congress aim for the achievable rather than the impossible.