Christie pitches raising Social Security retirement age to 69, instituting means testing

By Matt Rooney | The Save Jersey Blog

Seeking to steal the limelight from Marco Rubio and Hillary Clinton, Save Jerseyans, Chris Christie will deliver a promised entitlement reform speech Tuesday morning at the beginning of a multi-day swing through the key primary battleground state of New Hampshire.

He might be off to a good start with this… and we all know he needs to go big or go home at this point.

Here are some of the details of his entitlement reform pitch set for 11 am at Saint Anselm College:

Utilizing a Social Security means test for individuals with non-Social Security income exceeding $80,000 annually and eliminating payments entirely for those earning $200,000 per year or more

Raising the Social Security retirement age to 69 and early retirement to 64

Expanding Medicare premium means testing

Raising the Medicare eligibility age by one month per year, eventually reaching 67 by 2040 

Eliminating the payroll tax for seniors who are working past 62;

Implementing a Medicaid per capita caps system for the states

The full text of Gov. Christie’s address, as prepared for delivery, is right below the fold…

Speech at the New Hampshire Institute of Politics on Entitlement Reform
Hosted by the New Hampshire Institute of Politics at Saint Anselm College
Manchester, New Hampshire
April 14, 2015
__________________________

Thank you for coming here today.

I have come to New Hampshire today to talk about the challenges we’re facing as a country. Through its unwillingness to address our biggest challenges in an honest way, the Obama Administration has put us on a perilous course for both our short- term and long-term futures.  It is time to tell the truth about what we need to do in order to solve our problems and put our country back on the path to greater prosperity.

One of those challenges is the unrestrained growth of government spending on entitlements.  In the short term, it is growing the deficit and slowly but surely taking over all of government.  In the long term, it will steal our children’s future and bankrupt our nation.  Meanwhile, our leaders in Washington are not telling people the truth. Washington is still not dealing with the problem.  Washington is afraid to have an honest conversation about Social Security, Medicare and Medicaid with the people of our country.

I am not.

Washington refuses to acknowledge that we have a crisis on our hands.  We need to force them to acknowledge the crisis and fix it.

And unless we deal with this crisis, the young people of this country will get poorer; the disparity between young and old, the working middle class and the retired will grow even larger.  Our economy will grow even weaker.  Our debt will skyrocket.

Considering entitlements and interest make up almost 70% of the budget and the Obama Administration has run up the debt to a record $18 trillion, you’d think we’d be having a more robust, honest debate about them.  Yet, most politicians in Washington stay as far away from this issue as they can.

Democrats believe entitlements are a sacred cow that cannot be honestly discussed, perpetuating a dangerous fantasy to the American people—that these programs will always be there, even if we do nothing.

They are wrong.

Let me be clear. The changes I propose today would not affect seniors currently in these programs or seniors approaching retirement. Let me repeat that: these changes will not affect you, but will save these programs for your grandchildren. Anyone who tells you differently is simply not telling you the truth.

We should and we must ensure that Social Security and Medicare exist to prevent our seniors from falling into poverty.  The truth is that the majority of our seniors who need these programs have spent their lives working hard, providing for their families and living within their means.  They have earned the right to live out their later years without the fear of poverty.  But I am also here to tell you that the fairness we seek must be broad and must be earned.  This fairness must cover our hard working taxpayers footing the bills today and must include reforming these programs to ensure their existence today and for future generations.

This is a conversation Washington politicians don’t have because they do not believe the American people have the appetite for hard truths.  Once again, they underestimate our people.  Americans not only deserve fairness, they deserve the honesty of their leaders.

The concept of fairness, which underpinned the rationale for creating these programs in the first place, is being turned on its head.

Consider this:  In 1960, when John F. Kennedy was elected President, 26% of the federal budget was spent on payments to individuals.  Today, that number is 71%.  That is incredible.  Why has it happened?

In the last 25 years, while our economy has grown by over 200%, Medicare has grown by 539%.  Medicaid and related programs have grown by well over 800%.  They are 9 times as big as they were 25 years ago and the U.S. economy is only 3 times as big. This is not sustainable.  You know it.  I know it. The American people know it.  But professional politicians in Washington refuse to lead and are putting our future at risk.

When these programs were enacted, too many senior citizens lived in poverty.  The good news is that we have made progress over the years on that problem.  Now, however, we have a new problem:  as of 2011 over 20% of children in America live in poverty.  We spend over 56% of the income per every worker on seniors, while spending only 8% on children.

I believe the grandmothers and grandfathers of America would be appalled to know this.

Not only does this inaction drive more children into poverty, if we do not deal with this crisis now, these programs which have helped to prevent poverty for America’s elderly today, will be bankrupt and gone for the very people who are paying for them – our hard working, young American middle class.

The 65 and over population will increase by 102% between 2011 and 2050, while the working age population will increase by just 17% over that same period.

As the elderly population rises, the number of workers who pay into Social Security is dropping. By 2030, there will be about two workers per retiree, down from 3.4 workers in 2000.

Just let that fact settle in for a minute.

So let’s have a conversation. Why do we have Social Security? Why do we have Medicare?

We have them because we believe as a country that we should not let aging Americans fall into poverty after a lifetime of work. We believe that our seniors should not fear that they will be unable to make any ends meet as they grow older.

This is a promise worth keeping.

Now let’s talk about how we do that today and not in the context of when these programs were first created back in 1935 and 1965.

It is about fairness among and between American generations. And it is about telling all Americans the truth – and without delay.

If you believe we should keep this promise, as I do, that all Americans should have access to the economic security these programs provide, then that costs money.

Do we want to confront this by enacting backbreaking tax increases on our middle class, the size of which this country has never seen?  Do we want to risk the breaking of this promise to our future seniors through further delay and inaction?  Do we want to destroy our country’s future prospects because of a mountain of debt we can’t manage?  I reject all of those alternatives.

So how do we really fix the problem and not just get the usual set of political talking points?

I’ve put together a 12-point proposal to start a conversation about how we reform these programs.  None of these points would undermine our commitment to care for those most in need.  None would destroy the retirement security of older Americans.  But together, they would take over one trillion dollars from the growing pile of rapidly amassing government benefits, and start us on the road to making these programs solvent for generations in the future.

I’m going to talk about the biggest pieces of this proposal first, starting with Social Security.

Again, why do we have Social Security? It’s there so our seniors, after a lifetime of hard work, don’t fall into poverty. Which means it should be there for those who need it.

Now, the problem is that Social Security is, of course, the largest entitlement.  In fact, it is the largest federal program, with projected spending of $896 billion in the current fiscal year.   While it is not growing as fast as Medicaid or Medicare, it is slowly working its way to insolvency – which the actuaries say will come in the early 2030s, less than 20 years from now.

Social Security will come under increasing stress as the number of workers relative to the number of beneficiaries continues to shrink.  As it is, Social Security in the coming decades will pay out a trillion more in benefits than it collects in taxes.

Like that for Medicare, the fiscal picture for Social Security has been affected pretty dramatically by increases in life expectancy over time.  This is a good thing. Americans are living longer. This is something to celebrate but, at the same time, we can’t ignore the real effect that has on Social Security.

So how do we react to this? We should remember that Social Security should be retirement insurance.

I’m suggesting that Americans pay into this system throughout the course of their life knowing that it will be there if they need it to support them. So that seniors will not grow old in back breaking poverty.  But if you are fortunate enough not to need it, you will have paid into a system that will continue to help Americans who need it most.  That is what we have always done for each other through private charity and good government.

This is fair and it is what we must continue to do by changing Social Security.

Let’s ask ourselves an honest question: do we really believe that the wealthiest Americans need to take from younger, hard working Americans to receive what, for most of them, is a modest monthly Social Security check?  I propose a modest means test that only affects those with non-Social Security income of over $80,000 per year, and phases out Social Security payments entirely for those that have $200,000 a year of other income.

This would affect less than 2 percent of all recipients, but would contribute to the overall health of the system and recognize that the wealthiest among us don’t need this benefit when it comes at such great cost to our fiscal health and the opportunity to future generations.

We should apply the same concept to Medicare.

Medicare – which provides healthcare for senior citizens, is not growing as fast as Medicaid, but it is larger, in terms of federal government spending, at least as of today.

Now as everyone knows, most Americans have paid money through payroll taxes to help pay for this health coverage in their later years.  But there is a problem:  the payroll taxes and receipts the government collects today cover only about half of the gross cost of Medicare benefits and, according to CBO, that proportion will shrink to about a third over the next 25 years.

The share of GDP devoted to Medicare has grown sharply since its enactment 50 years ago, and the share of the population enrolled in Medicare has continued to grow. Today it stands at 16%, but that number will go up with an aging population.

So again, I ask the question. Why do we have Medicare? We have Medicare to give our seniors access to health care and to stop them from falling into poverty in the process. Let’s keep it simple – if you can afford to pay more for your health benefits you should and if you can’t, you should not.

Fairness for seniors who need it. Fairness to middle class Americans paying for it today.

Medicare is already means tested to a certain extent, with the 25% of the true premium cost that seniors pay for part B and part D rising on a sliding scale starting at incomes above $85,000 all the way up to 80% cost sharing for those with incomes above $214,000.

We should expand the sliding scale that already exists. Seniors with an $85,000 a year income will pay 40% of premium costs and increasing it to 90% above $196,000 a year.

This increased means testing should apply to Medicare Part D, the drug prescription program, as well.   Over the last few years, the prescription drug program has become more expensive than it first was as Democrats in the Senate acted to “close the donut hole”.  Higher cost shares for wealthier older Americans in part D can help address that growing cost.

Now, additionally, Americans are living longer and more productive lives today than at any point in our history. This development is an overwhelmingly positive one for our nation and our economy and the retirement system must be adjusted to reflect these new gains in longevity.  When Medicare was enacted, a man’s life expectancy in the United States was about 67 years old, and that for a woman was 73. Today, life expectancy in this country is 79 for a man and 82 for a woman.

We need to raise the retirement age for Social Security.  I’m proposing we raise the age to 69, gradually implementing this change starting in 2022 and increasing the retirement age by 2 months each year until it reaches 69. I also believe we need to raise the early retirement age at a similar pace — raising it by 2 months per year until it reaches 64 from the current level of 62.

Which means we should do the same for Medicare. We should raise eligibility age at a manageable pace of one month per year, so that by 2040 it would be 67 years old, and by 2064 would be 69 years old.  Raising the eligibility age, slowly so that people can plan for it, has another advantage.  It encourages seniors to remain in the workforce.

With life expectancy rising and both work conditions and general health of older Americans increasing over time, raising the retirement age makes sense – and it also encourages productive senior citizens to remain in the workforce.

A widely quoted study conducted some years ago by experts at the RAND Corporation found that the proportion of older Americans who can perform the simple tasks of everyday life has risen significantly over time.  This is a good thing.  I believe in the dignity of work, and America needs a larger labor force to help our growth. So we should encourage work, and like many of the proposals I will make today, this is a pro-work change.

We should take an additional positive step to encourage remaining in the workforce.

Let’s encourage work by reducing taxes for working seniors through eliminating their payroll tax.  Seniors who keep working past the age of 62 have paid their fair share to the government and shouldn’t have to keep paying payroll taxes for Social Security when it won’t really significantly increase the benefits they receive.

By the way, economists estimate that this payroll tax cut for those over 62 would contribute to labor supply growth and therefore GDP growth in the US.  This growth would offset much of the lost revenues from the tax cut.

Next, let’s discuss Medicaid.  It should be no surprise that Medicaid is the fastest growing federal entitlement, and the most problematic.  It is on a path to bankrupt not only the federal government, but the states as well.  Its span is massive, now covering over 72 million Americans.

Like many government programs, it is operated devoid of common sense. Too much care is delivered in the emergency room, the most expensive place. In most states, there is no co-pay and no deductible.  So, as in much of American health care, there is no incentive for the patient to worry about costs or rationally use health care resources.

And I can tell you this, as a governor, the federal government sets rules, and has a tedious and time-consuming process for any innovation by the states.  It is unduly complex and frustrating.  As a bipartisan panel of governors recently wrote, in discussing Medicaid:  “Too often, policies adopted at the national level – though they may have been well-intended – result in federal over-reach and trigger unintended and undesired consequences.”

How do we change this and still protect our neediest citizens?

The federal government should administer Medicaid by sending the states a fixed amount per enrollee.  The per capita cap could be different for each category of Medicaid recipient – the elderly, disabled, children, and non-elderly non-disabled adults.  And the cap amount could be allowed to grow, with the inflation rate, each year.

This approach takes into account growth in population or in costs and, even with the per enrollee cost growing at the inflation rate, this approach, according to the CBO, would reduce the deficit by well over a half a trillion dollars over the next ten years.

What else do we need to do?

It’s also time to make the process of a state like mine getting a Medicaid waiver simpler, less time-consuming, and repeatable.   As things stand now, governors and their states walk on eggshells for over a year or more while waivers to do perfectly rational things are debated by bureaucrats in Washington.  We should have templates for waivers that have worked in one state to make them easy to approve in another.   The process should be much more clear, transparent, and quick.

Another entitlement program that is also on the verge of bankruptcy is the Social Security disability insurance program.  The share of working age Americans collecting disability has doubled in the last twenty years – from 2.3% to 4.6%.  The disability rolls have increased by over 1.5 million just since January 2009, to more than 11 million people.  This is up from just 2.7 million in 1986.

The Social Security disability trust fund, without action by congress, is scheduled to run out of money next year – in 2016.  President Obama proposes to reallocate hundreds of billions of dollars of Social Security payroll tax retirement revenues to the disability trust fund with no strings attached, but I believe we should use this moment to reform the system and incentivize getting back to work.

In the Netherlands, before a worker can go on disability they must first work with their employer to create a rehabilitation plan, and they must act on it.  The Dutch also provide a tax break for those employers who keep the disabled on the job.

This simple reform has had an effect.  Holland has disability rates similar to ours, but these reforms have had the effect of reducing the flow of new disability beneficiaries by 60% in 6 years.

We should encourage those who truly are able to work to get back to work. Let’s increase the requirements on the number of years in which an applicant has worked in recent years, speed up the time which a determination about whether someone is eligible for disability is made and the time in which a beneficiary must return to work if their injury is only temporary. At the same time we should encourage vocational rehab, wage subsidies and preventive care services to keep an individual working with additional support.

Beyond these concepts, I also believe we must take these additional steps in Social Security, Medicare and Medicaid:

• We need to more accurately measure inflation, while giving seniors 85 or older added protection.  Social Security growth should be based on the true growth in the cost of living (a concept economists call chained-consumer price index). To provide added protection for the elderly who are most impacted by fluctuations in consumer prices, a one-time 5 percent increase in monthly benefits will be provided to all beneficiaries when they reach the age of 85.

• For Medicare, the rules for cost sharing– deductibles, caps on coverage, and co-pays, are all over the map.  There are different types of deductibles and cost-sharing depending on the type of service provided and where it is provided.  We should do exactly what the bipartisan Simpson-Bowles report – a report which President Obama ignored -proposed.  Simplify all this by having a uniform single annual deductible of $550, a uniform coinsurance rate of 20%, 5% cost-sharing above out of pocket expenses of $5,500 in a year, and a hard cap of $7,500 a year in cost-sharing.  This makes sense to me.  It is simpler.  It will save money.  We should do it.

• Over 65% of Medicaid spending goes to the elderly and disabled.  One of the biggest cost drivers in the program is spending on those who are “dual eligible” – that is, eligible for both Medicaid and Medicare.  Right now, Medicare provides the basic health care coverage for this population and Medicaid is used to fund co pays, contributions, and gaps in Medicare.  I’m proposing if a recipient is going to receive Medicaid for this purpose, then they must receive Medicare coverage through a managed care organization.  My state does this, and it saves money.  And it is not a partisan issue.  California requires the same thing.  This should be our national policy.

• We should take the simple step of requiring a small co-pay for Medicaid recipients – something on the order of $10 for a doctor or clinic visit, and $20 for a hospital visit, at least for those Medicaid recipients with incomes above the poverty level.  This will encourage better decisions by patients for both their health and the costs of their benefits.  We must introduce some economics into the decision-making process.  And it is only fair, as most Americans have a co-pay requirement in their private plans.

 
***

These proposals do not answer every question; they don’t represent everything we can do, but they are much more than anyone has been willing to do in Washington and they begin to tell our people the truth.

They protect those most in need, while being fair to those who are not. They are bipartisan and they are eminently doable.  Today.
Together, just taking these dozen steps will save over $1 trillion in the next decade.

The costs of not tackling this problem are staggering – and threatening most of all to the young St. Anselm’s students in this room.

First of all, no action will guarantee that the big safety net and retirement programs, Social Security, Medicare, and others, will be bankrupt and insolvent by the time you retire.

Second, no action will mean that the taxes you pay will do nothing but pay benefits to others and that those taxes will skyrocket to crushing levels.  Every other national priority will be sacrificed, our economic growth will grind to a complete halt and our national security will be put at even graver risk.

Already, our national defense has been hollowed out by years of underinvestment.  A bipartisan group of experts last year published a sobering report and continues to sound the alarm.  The navy has gone from 600 ships to being on a path to 260.  The air force is flying today the smallest and oldest force of combat aircraft it has ever flown.  In the face of underfunding and sequester, the number of active duty forces in the army is shrinking to 1990s levels, and only a handful of army brigades are ready for crisis response.

This decline in defense, in the face of projected massive deficits and fiscal imbalance, and despite a world that remains full of challenges and threats, is what the Harvard economic historian Niall Ferguson has called “the fatal arithmetic of imperial decline”. And if we don’t get our finances in order as a country, long-term decline will inevitably be our fate.

President Obama has left us a debtor nation.  In his short time in office, he has almost doubled the national debt – increasing it by over $8 trillion.

To the extent he and the Congress have been able to reach small agreements on fiscal matters, they have generally focused on the part of the budget which is not the problem – so-called “domestic discretionary” spending, which is only 15% of the budget this year.  And in any event, this part of the budget has only grown at roughly the inflation rate plus 1% for the last 25 years.  In other words, it has grown at less than the rate of the US economy.

One more thing that is important to note here.  There is no question that America would be better off with a market oriented, more flexible, more pro-consumer choice health care system than the one that was jammed down our throats by this President.  ObamaCare does not and cannot work for America.  If the facts I have outlined today prove anything, I believe they prove that we do not need and cannot afford an additional Washington controlled entitlement program—which is exactly what ObamaCare is today.  The trouble is that while the Courts and the Congress debate and decide whether ObamaCare can stand as it is or can be repealed and replaced, the growth of the entitlement beast continues unabated.  In fact, in many ways it is turbo charged by ObamaCare.

I will have more to say on ObamaCare in the weeks and months ahead.  And I will address it in the same direct and specific way I have addressed Social Security, Medicare and Medicaid with all of you today.

You see, we need to recognize that solving our biggest problems – like the growth of entitlements — can be done, but only with real leadership that tells the truth to the very people we aspire to lead.

When I took over as governor of New Jersey, my predecessor Jon Corzine had left us a mess.  Record deficits.  The highest top tax rates and overall tax burden in the country.  Schools that were failing.  Liabilities that were unaddressed and out of control.

People said New Jersey could never be turned around,

But we took action.  Cut 230 programs in the first year, and over 800 in the second year.  And balanced six budgets in a row, without raising taxes.  In fact, I vetoed every tax increase the democratic legislature ever sent me.  Reformed pension and health care benefits to reduce the burden on taxpayers by over $120 billion over 30 years.  Reformed teacher tenure for the first time in a century so that ineffective teachers can actually be removed from our children’s classrooms.  Capped property taxes.  And so far, we have added 175,000 private sector jobs in New Jersey – while shrinking the cost of government and state government employment by over 8,5000 employees in 5 years.

It wasn’t easy, and we’re far from finished.  But New Jersey has begun to turn around, and we’re growing, not shrinking.

It won’t be easy to turn around the fiscal mess that Barack Obama has left us either.  He has avoided the tough decisions.  Imagine that the straightforward discussion I’ve had with you today, President Obama has been afraid to have with you for the last eight years — from the day he declared for president in February of 2007 to this very day.  Is that real leadership for America? It is not. It is typical of the timid and failed leadership of Barack Obama.
It will take time to put in place all the measures we need to fully tap America’s potential.

But there is no time like the present to get started.

Strong, decisive and honest leadership matters for America.  It is only when governors, and presidents, and concerned citizens, decide to step up and take action that we can solve our problems.  Problems won’t get solved if we wait for others to solve them, or if we are afraid to confront what we know to be true.

Today, we know this: our entitlement system is out of control.  Its growth is not sustainable.  And inaction threatens the economic health of every generation that will follow us.

So let’s confront this problem head on.  Let’s take the steps we can take today, and resolve to do even more tomorrow.

Let’s come together for a better America, and not sit idly by while our prospects fade and our divisions grow.

I know some in both political parties will criticize these ideas.  Some will surrender to the divisiveness, the fear mongering and the scare tactics that are generously served on the political menu in Washington, DC every day.  They will flip flop from previous stands to curry favor; they will pretend that change will lead to peril.

My fellow Americans, peril is already here and it has been caused by our refusal to change, not by honestly embracing the real change that brings fairness to every generation. These are the truths you all know in your gut — I want to give voice to those common sense truths you already know.

Here’s what you’ll learn about me.  I have been talking about the growth of entitlements as a big problem, at both the state and federal levels, for a number of years. Not because it is politically popular, but because it is true. And because it will affect everything we can do as a country to make this century the second American century. I will not pander. I will not flip flop. I am not afraid to tell you the truth as I see it.

I want to help lead a national conversation that rewards truth over pandering; that rewards innovation over the timidity of the status quo; that honors the power of our history over the fear of failure.

That’s what leadership is all about.  And that is why I am so pleased that you let me join you today here in New Hampshire to talk about our future.

Thank you, God bless you, and God bless America.

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