While Donald Trump, Hillary Clinton and Bernie Sanders aren’t saying much about key concerns of older voters (such as Social Security, Medicare and retirement security), another presidential candidate is. Problem is: you may not know anything about him or his quixotic quest for the White House. But I think you should.
And I’m not talking about Libertarian candidate Gary Johnson or story-of-the-day potential third-party nominee David French.
No, I mean Boston University economics professor Laurence J. Kotlikoff — known as Larry — an independent write-in candidate with a Harvard Ph.D. who worked as an economist in the Reagan White House, co-wrote a bestseller about claiming Social Security benefits (Get What’s Yours) and is running for President “out of ongoing frustration” that neither Washington nor the leading candidates are serious about fixing the nation’s economic problems.
I’m not an egomaniac. I don’t believe I’m the most qualified person by a long shot. But I believe I could do a better job than the other candidates.
— Larry Kotlikoff, write-in presidential candidate
(Full disclosure: Next Avenue named Kotlikoff, 65, a 2015 Influencer In Aging for his work helping people understand Social Security’s byzantine rules, and our site has republished pieces he wrote for PBS NewsHour.)
‘Not an Egomaniac’
“Like many Americans, I’ve had it with amateur hour running our country,” says Kotlikoff, who has not held public office. “I’m not an egomaniac. I don’t believe I’m the most qualified person by a long shot. But I believe I could do a better job than the other candidates.”
A deficit hawk and tax-policy wonk, Kotlikoff believes federal spending has created a $199 trillion “fiscal gap” and views this as a top priority. The American public seems to agree. The Peter G. Peterson Foundation’s May Fiscal Confidence Index just found that 79 percent of voters say tackling the national debt should be among the President and Congress’ top three priorities.
Kotlikoff is a liberal on social matters, though, ranging from gun control to legalizing marijuana (he protested the Vietnam War back in the day).
But his unconventional ideas about reforming Social Security, taxes, Medicare and health care in general, border on the revolutionary, making Sanders look like a milquetoast. (You can read all about them in the 129-page platform on Kotlikoff2016.com that he spent two months writing; get a thumbnail explanation below.)
“We need to have radical surgery when it comes to our institutions and it has to be done very precisely and all at once,” Kotlikoff told me. “We can’t fix Social Security now and the tax system 20 years from now. These things are all connected.”
For decades, Kotlikoff has railed against ways he believes federal policies have shortchanged younger Americans in favor of older ones — he co-authored The Coming Generational Storm and The Clash of Generations. So it makes perfect sense that his campaign mantra is It’s Our Children.
Kotlikoff, who rarely speaks in media-craved soundbites, concedes his candidacy is a long shot: “It’s an uphill battle,” he told me, estimating that he has a 30 percent chance of winning — “on the high side.” Nine states don’t even explicitly permit write-in presidential candidates, Kotlikoff notes on his site.
Nevertheless, he’s looking for some wealthy backers as well as a Vice Presidential candidate, ideally one with the foreign policy chops he confesses he lacks. He plans to get his candidacy message out by speaking to the media, especially on radio.
“I don’t know if I have a 90 percent chance of getting elected or a zero percent chance, but I’m willing to try. I know that the chances we’ll get things fixed with the candidates we have is zero,” says Kotlikoff.
He says Clinton and Trump “come with massive baggage, supersized egos and visceral contempt for opposing views” and that Trump “is not fit to be President.” As for Sanders, Kotlikoff says, “I agree with where his heart is on the issues, but not with his solutions. I don’t think they’re real answers.” Kotlikoff had high hopes for John Kasich — “an old friend of mine” — but says he “turned out to be a disappointment.”
Among Kotlikoff’s proposals:
An overhaul of Social Security “I think we have this big disaster looming in Social Security and we have to take care of our kids and our seniors,” says Kotlikoff. What’s more, he adds, the system is “a user’s nightmare with 2,728 rules and hundreds of thousands of rules about those rules” — a “basic retirement saving system that no one remotely understands.”
He would essentially take the 2,728 rules down to about 10 by: freezing the Social Security system, grandfathering in current beneficiaries and using future Social Security payroll taxes to pay off the retirement benefits currently owed (Kotlikoff would eliminate the ceiling on Social Security’s FICA payroll tax; currently, only wages up to $118,500 are subject to the full 15.3 percent tax rate).
Going forward, he’d convert Social Security for future beneficiaries into a Personal Security System that has trappings of privatization. All workers under 60 would be required to put 10 percent of their annual wages into a low-cost, computer-run, diversified Personal Security Account (PSA) invested in stocks, bonds and real estate investment trusts. (That’s in addition to the 12.4 percent FICA tax.) The government would contribute to PSAs of low-income, unemployed and disabled Americans.
I realize that many financial advisers say that we should save at least 10 percent a year, but is that really possible given that a recent Federal Reserve study found that almost one-third of adults say they are “struggling to get by” or “just getting by?” Kotlikoff’s answer: Yes. “People around the world save at least 10 percent,” he says.
Under his plan, you’d be able to start receiving your PSA money at 62, just as with Social Security today. From ages 61 to 70, your PSA balance would be gradually sold to buy safe, inflation-indexed Treasury securities known as TIPs. The value of your PSA would never be less than the sum of your contributions (adjusted for inflation), so at retirement, you’d be protected from a previous drop in the stock or bond markets. And if you died before age 70, your PSA balance would go to your heirs.
An overhaul of the tax system Kotlikoff wouldn’t abolish the Internal Revenue Service, Ted Cruz-style, but would “radically simplify” taxes. He also says his tax reform plan would be fairer than the current system and is designed to both produce at least 25 percent more revenue and raise (inflation-adjusted) wages by at least 10 percent. Wages could rise that much, Kotlikoff says, because corporations would find his tax system so attractive, they’d invest more in workers and pay them more.
After reading his tax proposals several times, however, I couldn’t call his proposals simple to understand.
He’d eliminate the personal income tax (as well as all of today’s deductions and credits), the estate and gift tax and the corporate income tax. Instead — and here’s where things get complicated — Kotlikoff would replace them with: a European-style 20 percent Value Added Tax (VAT) similar to the one Ted Cruz proposed; a “progressive personal consumption tax” of 5 to 30 percent that excludes the first $100,000 in consumption; an inheritance tax and a tax on carbon.
“At first glance, getting rid of the corporate income tax and personal income tax seems extremely right wing, but the system I propose is more progressive than the current system,” says Kotlikoff.
The shorthand version of his tax plan: everyone would pay a 30 percent tax rate on earnings — a 15 percent FICA tax and a 15 percent effective tax on working associated with the VAT. Yes, the VAT tax rate is 20 percent, but, you see…well it’s too painful to explain.
Although Kotlikoff would eliminate the earned income tax credit and child tax credit, every American would get a $2,000 lump-sum payment, indexed to inflation. Only the top 20 percent of households “when ranked by spending” would pay the consumption tax, so roughly 80 percent of Americans wouldn’t need to file tax returns. The new inheritance tax would end loopholes that now let the wealthy skirt estate and gift taxes through complex trusts and other estate-planning tools; with Kotlikoff’s plan, all inheritances over $5 million would be taxed at a 20 percent rate. (Today, the federal and gift tax exemption is $5.45 million per individual and the top federal estate tax rate is 40 percent.)
If all these tax proposals have you reaching for an aspirin, you have no need to apologize.
An overhaul of health insurance and Medicare Kotlikoff would make employer-based health care “largely redundant” and eliminate federal tax breaks for employer benefits. Instead, all Americans would get free, basic health insurance from the government, including some long-term care coverage, owing only co-pays and deductibles. They’d also be able to buy supplemental insurance with no denial of coverage due to pre-existing conditions, at any age.
Kotlikoff says his health reform plan “turns basic health insurance into a commodity, like wheat.” Insurers competing to provide the same basic insurance plan would fight to provide the best quality of care to re-sign policyholders at the end of the year.
It is not, he insists, a Sanders-style single-payer health care system. It’s a single-insurer health care system with health care services provided by private-sector doctors and hospitals, not by the government.
Interest rate increases by the Fed Many economists and Fed watchers now think Janet Yellen will boost rates at the Fed’s July meeting. Kotlikoff favors a “gradual but major change” in the Fed’s current policy of “keeping rates abnormally low.”
When I asked Kotlikoff how high he’d like to see bank CD rates (currently between about 1.0 and 1. 6 percent), he said “probably 3 to 4 percent,” after inflation.
I think that could be a big help for retirees on fixed incomes, but it could also mean trouble for others who want to get mortgages or car loans. When CDs were around 4 percent in the early 1990s, mortgage rates hovered around 7 to 8 percent (they’re now at 3.7 percent, on average) and car loans went for about 10 percent vs 3.2 percent today, on average.
Lower rates on student loans Kotlikoff would ask Congress to let students borrow at the Treasury bond rate, now 2.6 percent, but they’d owe a rate that’s one point higher if they didn’t complete their degrees. Today, the interest rate on student loans typically ranges from 4 to 8 percent.
What Kotlikoff Wants From Supporters
If you’re intrigued by Kotlikoff, he doesn’t want you to send money. Instead, he prefers you go to his site, read the e-book layout out his campaign platform and then send it to 10 people to spread the word.
“We need somebody who will tell the truth,” says the economics professor. “In academia, we’re trained to do nothing but tell the truth.”