Thursday, Dec. 31, 2015 | 2 a.m.
In a series of columns, members of the Brookings Institution look at what made economic headlines in 2015 and what to look for in 2016.
The 2016 presidential election confronts the U.S. electorate with political choices more fundamental than any since 1964 and possibly since 1932. That statement may strike some as hyperbolic, but the policy differences between the two major parties and the positions of candidates vying for their presidential nominations support this claim.
A victorious Republican candidate would take office backed by a Republican-controlled Congress, possibly with heightened majorities and with the means to deliver on campaign promises.
On the other hand, the coattails of a successful Democratic candidate might bring more Democrats to Congress, but that president would almost certainly have to work with a Republican House and, quite possibly, a still-Republican Senate.
The political wars would continue, but even a president engaged in continuous political trench warfare has the power to get a lot done.
Candidates always promise more than they can deliver and often deliver different policies from those they have promised. Every recent president has been buffeted by external events unanticipated when he took office. But this year, more than in half a century or more, the two parties offer a choice, not an echo. Here is a partial and selective list of key issues to illustrate what is at stake.
The Affordable Care Act, known as Obamacare or the ACA, passed both houses of Congress with not a single Republican vote. The five years since enactment of the ACA have not dampened Republican opposition.
The persistence and strength of opposition to the ACA is quite unlike post-enactment reactions to the Social Security Act of 1935 or the 1965 amendments that created Medicare. Both earlier programs were hotly debated and controversial. But a majority of both parties voted for the Social Security Act. A majority of House Republicans and a sizeable minority of Senate Republicans supported Medicare. In both cases, opponents not only became reconciled to the new laws but eventually participated in improving and extending them. Republican members of Congress overwhelmingly supported, and a Republican president endorsed, adding disability insurance to the Social Security Act. In 2003, a Republican president proposed and fought for adding a drug benefit to Medicare.
The current situation bears no resemblance to those two situations. Five years after enactment of Obamacare, in contrast, every major candidate for the Republican presidential nomination has called for its repeal and replacement. So have the Republican speaker of the House of Representatives and majority leader in the Senate.
Just what “repeal and replace” might look like under a GOP president remains unclear, as ACA critics have not agreed on an alternative. Some plans would do away with some of the elements of Obamacare and scale back others. Some proposals would repeal the mandate that people carry insurance, the bar on “medical underwriting” (a once-routine practice under which insurers vary premiums based on expected use of medical care), or the requirement that insurers sell plans to all potential customers. Other proposals would retain tax credits to help make insurance affordable but reduce their size, or would end rules specifying what “adequate” insurance plans must cover.
Repeal is hard to imagine if a Democrat wins the presidency in 2016. Even if repeal legislation could overcome a Senate filibuster, a Democratic president likely would veto it and an override would be improbable.
But a compromise with horse-trading, once routine, might once again become possible. A Democratic president might agree to Republican-sponsored changes to the ACA, such as dropping the requirement that employers of 50 or more workers offer insurance to their employees, if Republicans agreed to changes in the ACA that supporters seek, such as the extension of tax credits to families now barred from them because one member has access to very costly employer-sponsored insurance.
In sum, the 2016 election will determine the future of the most far-reaching social insurance legislation in half a century.
Social Security faces a projected long-term gap between what it takes in and what it is scheduled to pay out. Every major Republican candidate has called for cutting benefits below those promised under current law. None has suggested any increase in payroll tax rates. Each Democratic candidate has proposed raising both revenues and benefits. Within those broad outlines, the specific proposals differ.
Most Republican candidates would cut benefits across the board or selectively for high earners. For example, Sen. Ted Cruz proposes to link benefits to prices rather than wages, a switch that would reduce Social Security benefits relative to current law by steadily larger amounts: an estimated 29 percent by 2065 and 46 percent by 2090. He would allow younger workers to shift payroll taxes to private accounts.
Donald Trump has proposed no cuts in Social Security because, he says, proposing cuts is inconsistent with winning elections and because meeting current statutory commitments is “honoring a deal.” Trump also favors letting people invest part of their payroll taxes in private securities. He has not explained how he would make up the funding gap that would result if current benefits are honored but revenues to support them are reduced.
Sen. Marco Rubio has endorsed general benefit cuts, but he has also proposed to increase the minimum benefit. Three Republican candidates have proposed ending payroll taxes for older workers, a step that would add to the projected funding gap.
Democratic candidates, in contrast, would raise benefits, across the board or for selected groups — caregivers or survivors. They would switch the price index used to adjust benefits for inflation to one that is tailored to consumption of the elderly and that, analysts believe, would raise benefits more rapidly than the index now in use. All would raise the ceiling on earnings subject to the payroll tax. Two would broaden the payroll tax base.
As these examples indicate, the two parties have quite different visions for Social Security. Major changes, such as those envisioned by some Republican candidates, are not easily realized, however. Before he became president, Ronald Reagan in numerous speeches called for restructuring Social Security. Those statements did not stop him from signing a 1983 law that restored financial balance to the very program against which he had inveighed but with few structural changes. George W. Bush sought to partly privatize Social Security, to no avail. Now, however, Social Security faces a funding gap that must eventually be filled.
The discipline of trust fund financing means tax increases, benefit cuts or some combination of the two are inescapable. Action may be delayed beyond the next presidency, as current projections indicate that the Social Security Trust Fund and current revenues can sustain scheduled benefits until the mid 2030s. But that is not what the candidates propose.
Voters face a choice, clear and stark, between a Democratic president who would try to maintain or raise benefits and would increase payroll taxes to pay for it, and a Republican president who would seek to cut benefits, oppose tax increases, and might well try to partially privatize Social Security.
If the next president serves two terms, as six of the past nine presidents have done, four currently sitting justices will be older than 86 and one older than 90 by the time that presidency ends — provided that they have not died or resigned.
The political views of the president have always shaped presidential choices regarding judicial appointments. As all carry lifetime tenure, these appointments influence events long after the president has left office. The political importance of these appointments has always been enormous, but it is even greater now than in the past.
One reason is that the jurisprudence of sitting Supreme Court justices now lines up more closely than in the past with that of the party of the president who appointed them. Republican presidents appointed all sitting justices identified as conservative; Democratic presidents appointed all sitting justices identified as liberal. The influence of the president’s politics extends to other judicial appointments as well.
A second reason is that recent judicial decisions have reopened decisions once regarded as settled. The decision in the first case dealing with the Affordable Care Act, NFIB v. Sibelius, is illustrative.
When the ACA was enacted, few observers doubted the power of the federal government to require people to carry health insurance. That power was based on a long line of decisions, dating to the 1930s, under the constitutional clause authorizing the federal government to regulate interstate commerce.
In the 1930s, the Supreme Court rejected an older doctrine that had barred such regulations. The earlier doctrine dated from 1905, when the court overturned a New York law that prohibited bakers from working more than 10 hours a day or 60 hours a week. The court found in the 14th Amendment, which prohibits any state from “depriving any person of life, liberty or property, without due process of law,” a right to contract previously invisible to jurists that it said the New York law violated.
In the early and mid-1930s, the court used this doctrine to invalidate some New Deal legislation. Then the court changed course and authorized a vast range of regulations under the Constitution’s Commerce Clause. It was on this line of cases that supporters of the ACA relied.
Nor did many observers doubt the power of Congress to require states to broaden Medicaid coverage as a condition for remaining in the Medicaid program and receiving federal matching grants to help them pay for required medical services.
To the surprise of most legal scholars, a 5-4 Supreme Court majority ruled in NFIB v. Sibelius that the commerce clause did not authorize the individual health insurance mandate. But it decided, also 5 to 4, that tax penalties could be imposed on those who fail to carry insurance. The tax saved the mandate. But the decision also raised questions about federal powers under the commerce clause.
The court also ruled that the Constitution barred the federal government from requiring states to expand Medicaid coverage as a condition for remaining in the program. This decision was odd, in that Congress certainly could constitutionally have achieved the same objective by repealing the old Medicaid program and enacting a new Medicaid program with the same rules as those contained in the ACA that states would have been free to join or not.
NFIB v. Sibelius and other cases the court has recently heard or soon will hear raise questions about what additional attempts to regulate interstate commerce might be ruled unconstitutional and about what limits the court might impose on Congress’s power to require states to implement legislated rules as a condition of receiving federal financial aid.
The court has also heard, or soon will hear, a series of cases of fundamental importance regarding campaign financing, same-sex marriage, affirmative action, abortion rights, the death penalty, the delegation of powers to federal regulatory agencies, voting rights, and rules under which people can seek redress in the courts for violation of their rights.
The the next president will likely appoint enough Supreme Court justices and other judges to shape the character of the Supreme Court and of lower courts with ramifications both broad and enduring on important aspects of every person’s life.
Henry Aaron is the Bruce and Virginia MacLaury senior fellow in the Economic Studies Program at the Brookings Institution. He wrote this for insidesources.com.