Budget guru sees ‘super-subprime crisis’

Evolution and shifts in position
McCain’s position on tax increases to fund Social Security has been variable.

At times, he has been critical of Obama’s payroll tax plan even as he has said that everything is on the table — a stance which would seem to include tax increases.

But after McCain reiterated this position on ABC News, conservative activists were critical, and he backed off slightly.

“Any negotiation I might have, when I go in, my position will be that I am opposed to raising taxes. But we have to work together to save Social Security,” he later said.

This appears to mean that McCain won’t advocate for tax increases, but if they are part of a larger reform package, he might acquiesce.

“He’s very clear about the desire to keep everything on the table, so you can get an effective reform,” said Holtz-Eakin.

According to the Wall Street Journal, in 2000, McCain ran on a platform of diverting a portion of payroll taxes into private accounts — a plan that would take money out of the current system.

But now, McCain’s campaign maintains that he supports private accounts only as an add-on to the current system rather than a replacement.

Like McCain, Obama has been at times a vocal advocate of the “everything is on the table” approach to Social Security reform.

“Everything should be on the table. I think we should approach it the same way Tip O'Neill and Ronald Reagan did back in 1983,” he told George Stephanopoulos of ABC News in May 2007.

“They came together," said Obama. "I don't want to lay out my preferences beforehand, but what I know is that Social Security is solvable.”

Does this include raising the retirement age?

According to the Washington Post, Obama later ran an ad saying that protecting Social Security benefits is one of his core reform principles.

“He wants to protect middle-class families,” Furman said of Obama’s approach. “He thinks you can’t do that if you’re raising the retirement age.”

MSNBC video   Obama sees long-term problem Oct. 30: During NBC's Philadelphia debate, Barack Obama said Social Security's long-term problems are due to 78 million baby boomers heading for retirement. MSNBC

How they have voted
Last year, the Senate considered an amendment that would require wealthy Medicare beneficiaries to pay a greater share of their prescription drug costs.

Obama voted against this amendment. McCain didn’t vote, but has said that he supports the idea of having wealthy beneficiaries pay more for their benefits. His campaign says that would save the government billions of dollars.

McCain has never been a big supporter of the Medicare prescription drug program, which was created in 2003 despite his opposition.

Fearing the program would be too costly, he was one of 21 senators to vote “no” on the Medicare prescription drug bill.

Obama was not in the Senate when the drug entitlement was created, but he has regularly voiced support for it, even as he’s backed some cost-saving measures, like giving the government the authority to use Medicare to negotiate drug discounts. In fact, he supported an amendment McCain co-sponsored to give the government this authority.

As far as Social Security is concerned, the candidates have not faced too many votes in recent years.

Week I: China Week II: Iran Week III: Same-sex marriage Week IV: Energy Week V: Immigration Week VI: Taxes Week VII: Globalization Week VIII: Medicare and Social Security Week IX: Pakistan Week X: Iraq Week XI: Guns Week XII: Abortion Week XIII: Science Week XIV: Consumer issues Week XV: Education

But twice, McCain and Obama voted on opposite sides of legislation repealing a 1993 tax increase on Social Security benefits, once in 2006 and again earlier this year. McCain voted to repeal the tax increase, while Obama voted to keep it.

Surprises for the new president
If the economy keeps stumbling, neither candidate is likely to have much luck raising taxes or cutting benefits. But that doesn’t mean the shortfalls in these programs won’t affect a McCain or an Obama presidency.

Starting this year, the oldest members of the baby boom generation are eligible for Social Security, according to the GAO. In three years, they will be eligible for Medicare. As more boomers collect benefits, the budget will be pinched, with bigger and bigger percentages of total outlays going to support the programs for retirees.

Analysts say that will put the burden squarely on the youngest Americans, who may have to foot the bill someday through higher taxes, reduced benefits or slower economic growth.

“We’ve got massive taxation without representation going on right now,” Walker said. “In many cases, the people who are going to have to pay the bills are too young to vote or aren’t born yet. That is not only fiscally irresponsible it is morally reprehensible.”

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