Working at It

by Ramesh Ponnuru

Jonathan Chait writes:

It’s odd that so many Republicans, including Ryan, have suddenly grown obsessed with the importance of coaxing every last hour of work out of the middle class. Ryan has spent the last several years vowing to reduce Medicare and Social Security benefits for more affluent workers. Indeed, he has presented such policies as a civilization-preserving imperative. Obviously, reducing Social Security and Medicare benefits for the middle class would have the exact same effect as reducing health-care subsidies for the middle class.

I don’t think Chait is right. His theory seems to be that reducing benefit levels for the affluent in these entitlement programs reduces the incentive to work in the same way that the means-test for Obamacare’s tax credits does. But progressive indexing for Social Security, for example, would work differently than that means-test does: It would be based on lifetime income rather than one year’s income. So any anti-work effect would probably be pretty small—and be more than outweighed by the need to earn more income to provide for retirement. Adjusting entitlement programs in that way is a good idea, as Andrew Biggs has argued. It would be much harder to adjust health-care subsidies for working-age people that way. In my view, it would be best to offer a flat tax credit that does not depend on income at all.