On Worker Benefits, the Question is One of Moral Probity, Not Fiscal Prudence

Fiscal considerations are at the forefront of contemporary policy debates.  We often hear some version of the “can we afford this?” question coupled with a reference to our nearly $20 trillion debt—particularly when we debate the merits of social programs.  Of course, in order to know whether we can “afford” a social program, we must take account of both other spending decisions and tax policies.  Put differently, affordability questions are always resource allocation decisions. And, resource allocation decisions necessarily implicate value judgments as we decide (1) to whom we want to allocate resources and (2) what proportion of our resources we will devote to a certain group, cause, or program.

Senator Elizabeth Warren (D-MA) deserves credit for  making these considerations clear to the American people by introducing the Seniors and Veterans Emergency Benefits Act (SAVE Benefits Act) (bear with me while I explain the bill so we can better understand the Senator’s adroitness).  The bill would give all recipients of Social Security, veterans benefits, and the disabled a one-time payment in of $581 in 2016, as they would not receive a cost-of-living adjustment (COLA) this year.  Social Security is indexed to inflation, and the inflation formula Congress uses shows no consumer inflation over the past year, mainly due to a steep decline in gas prices—a commodity which seniors tend not to use.  Items that make up a large portion of seniors’ expenses—food and healthcare—have, in fact, increased in price.  Moreover, the lack of a COLA presents an enormous problem as for over 15 million Americans as Social Security is all that stands between them and poverty.  To remedy the lack of a COLA while not increasing the deficit, Senator Warren proposed that we obtain the funds from eliminating a tax loophole that subsidizes pay increases for CEOs, know as the “Performance Pay” loophole.

According to the Institute for Policy Studies, in 1993, to curb executive pay excess, Congress passed legislation that capped the tax deductibility of executive pay at $1 million.  But the law left a huge loophole, allowing corporations to exempt “performance-based” pay from the $1 million limit.  Consequently, compensation packages for top executives have often been structured to avoid paying taxes on corporate earnings, leading to a sharp increase in “performance-based” compensation—even when CEOs don’t reach their performance goals.  Eliminating this loophole would save taxpayers $50 billion over 10 years.

The SAVE Benefits Act, one may think, is a win-win situation: eliminate a tax loophole that legislators, including at least some Republicans, dislike, and use the money to help the cash-strapped, working class people live a decent life—all without adding even one penny to the deficit.  And let me be clear: Senator Warren is not proposing raising taxes; this is a tax loophole, meaning tax payers are subsidizing CEO pay.  But Senator Warren knew her bill would not have even the slightest chance of being passed in Congress.  So then why did the Massachusetts Senator spend time crafting and marketing the bill?  She did it to present a stark choice to Congress and the American people: do we want to tax payer money to subsidize the pay of a few hundred CEOs or use the very same money to assist the over 70 million Americans who receive either Social Security, veterans’ benefits, or disability benefits—all without impacting the deficit?  But the bill was also about something much larger than its contents.  It was about asking the American people what our values are as a society—who we want the government to work for.  And, the Senator was successful in getting her point across as the GOP refused to move the bill forward in Congress.  By doing so, they chose to continue subsidizing powerful CEOs rather than help working class seniors and brought to light the priorities of the GOP.

The decision to pass pro-worker bills such as the SAVE Benefits Act is not (only) a fiscal decision, but a moral choice.  Senator Warren articulated this reasoning in an interview: “For me, the way I kind of think about it, is it’s about choices.  We have the money to do this, only right now the money goes to fund a loophole that benefits a handful of corporate CEOs.  We can use the same money to help out seniors and veterans.”   Ultimately, in the debate over social policy, we tend to ignore a key point: these policies are not simply a result of fiscal considerations; they speak volumes about who we value as a society—who the government is working for.