Gregg Easterbrook

Increasingly, Mitt Romney seems the Republican candidate who has given serious thought to governing – to what specific policy actions he would take if he became president. The other Republican candidates seem mainly concerned with self-promotion and applause lines, while Newt Gingrich’s “Day 1 Project” seems more like a dress rehearsal than a real concept for governing.

If Romney is the serious challenger to President Barack Obama, then his fiscal policy speech a few days ago bears inspection. It was notably better than most campaign speeches, and contained both gold and dross. Here are some highlights:

Gold: “We cannot with moral conscience borrow trillions of dollars that can only be repaid by our children.” Reckless borrowing, with the invoice passed to our children – nobody in power in Washington right now will be asked to repay the national debt – is not just numbers, it is a moral issue. Romney recognizes this.

Dross: Obama is to blame for “massive defense cuts.” Democrats always accuse Republicans of wanting to despoil the environment; Republicans always accuse Democrats of wanting a weak defense. Neither claim is true. Converted to today’s dollars, the 2000 defense budget was $390 billion. Check Table 32-1 for the key Pentagon numbers under Obama. The 2010 defense budget, the first Obama fully controlled, was $690 billion, and this year’s defense budget is $708 billion. “Massive defense cuts” is not true. Although the White House does project a decline in defense spending to $620 billion in 2013, almost all the projected reduction stems from the expected ends of the wars in Iraq and Afghanistan. Doesn’t everyone want those wars to end?

Gold: “I will make government simpler, smaller, and smarter.” In Romney’s case this is not just rhetoric, since he helped make Massachusetts government simpler, smaller and smarter. Compared to most other states, Massachusetts has a strong economy, good health care coverage for average people and a relatively small debt. If Romney could do for the nation what he did for Massachusetts, we’d all be happy.

Dross: Seniors should be angry at the White House because “it was President Obama who cut $500 billion from Medicare.” The essence of doubletalk is to say that federal spending must be reduced, and then denounce spending cuts. Equally important, Obama has not reduced Medicare spending, and Romney must know this.

The “$500 billion Medicare cuts” figure being batted around by Republican candidates is an estimate for 10 years of projected future reductions from unspecified future savings to be identified by the new Independent Payment Advisory Board, whose advice does not even start until 2014. Obama’s own actuaries have warned there is an “extremely low likelihood” many projected Medicare cuts will occur.

Twenty-four karat gold: Romney placed his hand on the third rail of American politics, by proposing Social Security cutbacks. He said, “I believe we can save Social Security with a few commonsense reforms. First, there will be no change for retirees or those near retirement. No change. Second, for the next generation of retirees, we should slowly raise the retirement age. And finally, for the next generation of retirees, we should slow the growth in benefits for those with higher incomes.”

The test of leadership is saying what your audience does not want to hear. John Kennedy proved he was a leader by telling the East Coast liberal establishment that the old Soviet Union was a dire threat, something it did not want to hear. Lyndon Johnson proved he was a leader by telling Southern states the Civil Rights Act must pass. Ronald Reagan proved he was a leader by telling conservatives the time had come for arms control.

Is Romney the one to tell America what it does not want to hear about Social Security? There simply is no escape route from the red-ink mess that does not include raising the Social Security retirement age (lifespans are significantly increased from when the system was created), slowing the growth in benefits and reducing benefits to the well-off.

The Social Security trustees report that the system can currently pay only about three-quarters of scheduled benefits. In 2010, the report notes, that system wasn’t even self-sustaining, having to draw on the federal debt. If benefits aren’t trimmed, either taxes must rise or the federal deficit must accelerate anew. Neither would be good for the country, and that’s assuming China would keep loaning us additional money, which may not be an accurate assumption.

Beyond that, Social Security is not and has never been an investment program: it is an income transfer program, taking from working-age people and giving to retirees. Many seniors need their Social Security checks, but those who don’t should no longer receive them. That average working-age people are being taxed to fund income transfers to well-off seniors is bad policy, and not moral. National leaders including President Obama strenuously avoid speaking the truth about Social Security, because that truth is so unpopular.

Should Romney reach the White House, a measure of his presidency will be whether he keeps the promises made in this speech.

Photo: Republican presidential candidate and former Massachusetts Governor Mitt Romney listens as former New Hampshire Governor John Sununu speaks at a campaign stop in Exeter, New Hampshire November 3, 2011. REUTERS/Brian Snyder

On Friday, the Social Security Administration is expected to announce that for the second consecutive year, there will be no Social Security cost-of-living increase. That makes perfect sense, since the cost of living is not rising. But this being an election year, there may be intense political demand for a special bonus to retirees, like the $250 bonus checks issued — regardless of need — to all senior citizens in 2009.

It is imperative that President Barack Obama, and Congress, resist demands for bonus payments to senior citizens. The federal budget — and long-term projections for Social Security — are in bad enough shape as is. If Washington can’t resist handing out bonuses, there is no hope the national red ink ever can be stopped.

There’s no “right” to higher Social Security benefits.
In 1972, Congress created a COLA system to increase Social Security benefits (and the threshold level of Social Security taxation) in sync with the rising cost of living. Each year from 1972 to 2009, Social Security benefits rose, owing to inflation. Seniors became accustomed to the first check in January of any year containing a boost. Some surely believe that law requires their benefits to rise annually.

But there’s no right to higher Social Security benefits — indeed, no “right” to any particular level. Congress may change Social Security benefits and tax formulas at whim. So far changes have meant higher benefits, but they can also mean reductions of benefits. Reduced Social Security benefits, at least for well-off seniors, are inevitable in the future. For now, if there is no inflation, there should be no COLA increase.

But wasn’t there a big benefit increase in 2009?
Recall that in mid-2008, fossil fuel prices briefly spiked, then fell. Timing of the spike interacted with details of the formula used by the Social Security Administration to cause a 5.8 percent benefit increase in 2009, though consumer prices actually rose by less than half that in the previous year.

Now a detail of the same formula, having to do with the third quarter of 2008, will ensure no increase in January 2011. Senior citizen lobbies may demand the formula be changed. Though they didn’t complain when the formula awarded too much in 2009. Considering the 5.8 percent 2009 increase, for the last two years seniors have been slightly overpaid by Social Security, and the slight overpayments will continue.

Why the 2009 bonus checks?
In theory, the $250 bonus checks of 2009, total cost about $14 billion, were for economic stimulus. Obama has been honest about the political background: “We never forget seniors because they vote at very high rates.” Though the 2009 bonus was described by the White House as a “one-time” bonus for 2010, Obama proposed a second $250 bonus, which was not enacted by Congress. Will there be a fresh round of calls for another “one-time” bonus?

But aren’t there senior citizens in need?
Of course! The average Social Security retiree benefit is about $14,000 annually, hardly princely. Many recipients need more. And many recipients need less — as a group, senior-citizens are the best-off sector of American society, with the highest net worth and by far the most government support.

Social Security should be reformed so that those at the bottom receive more while those at the top receive nothing.

This is not how seniors’ lobbies approach the issue. They call on the political fiction that Social Security recipients are only “getting back what they put in.” This is a total fantasy: Social Security is an income transfer program, not a savings instrument, with today’s workers taxed to provide for yesterday’s. The political fictions of Social Security are skewered by Allan Sloan here. Cutting and eventually ending Social Security payments to the affluent will be needed to keep the program from running out of funds.

Isn’t there plenty of money in the Social Security Trust Fund?
That “trust fund” is another fiction — it is no more than a drawer full of IOUs from one government agency to another.

In 2009, the Congressional Budget Office said Social Security outlays would not exceed revenue until 2017; instead this happened in 2010. The CBO further said Social Security would run a roughly $150 billion surplus in the years representing a two-term Barack Obama presidency; instead a $70 billion deficit is now predicted. So surely you feel nice and secure about the Social Security trustees saying their system has plenty of money until 2037.

Don’t seniors deserve extra because of the recession?
A year ago, when the Social Security Administration said there would be no COLA for 2010, President Obama backed a second “one-time” bonus check, saying, “We must act on behalf of those hardest hit by this recession.”

As a group, seniors are the least hardest hit. Most are retired, so unemployment, the biggest economic problem associated with the recession, does not impact them. Many consumer prices have fallen, which increases seniors’ buying power.

Two kinds of prices are rising — college education and health care. The former has no impact on seniors, while the latter has limited impact because seniors don’t pay most of their health care costs. Young workers pay those costs via Medicare taxes.

Of course there are individual seniors in need — but for senior-citizen lobbies to depict seniors overall as hard-hit by the recession is political selfishness in the extreme.

Why you should worry about Social Security.
Here’s the Social Security Administration’s current Social Security fact sheet and below are two spooky facts quoted directly from it:

• By 2035, there will be almost twice as many older Americans as today — from 40.7 million today to 76.3 million.
• There are currently 2.9 workers for each Social Security beneficiary. By 2035, there will be 2.1 workers for each beneficiary.