The GOP Debate's Truthiness on Money Issues
The candidates on retirement plans, taxes and college debt
I was so looking forward to last night’s Republican presidential debate because CNBC promised it would be about the economy and our wallets. I really wanted to hear what the candidates would say about the economic concerns facing the Next Avenue audience: people 50+.
Instead, the debate taxed my patience. Precious few questions were about the U.S. economy or the personal finance challenges Americans face today and are likely to encounter in coming decades. (I’ll get to a few that were asked, and the answers, momentarily.)
But where were the questions about: the long-term unemployed; long-term care costs; retirement income security; the accuracy of the Social Security Cost of Living Adjustment formula; which tax deductions they’d eliminate; the unemployment and underemployment rate of recent college grads, the boomers’ retirement savings shortfall and age discrimination by employers?
Or, as New Jersey Gov. Chris Christie said: “Wait a second. We have $19 trillion in debt. We have people out of work… And we’re talking about fantasy football? Can we stop?”
Even when questions on critical topics were raised, the candidates frequently ducked them.
For instance, Dr. Ben Carson was asked whether the government should be involved in controlling some of the recent enormous drug price increases. After saying “there is no question that some people go overboard when it comes to making profits,” he immediately switched to the need to reduce government regulations. (Christie said: “If there is somebody who is price-gouging, we have laws for prosecutors to take that on.”)
When Sen. Ted Cruz was asked what he would do to help women earn what men do (they now earn 77 percent of men, on average), he responded: “Well, we’ve gotta turn the economy around for people who are struggling” and then discussed the single moms in his family.
OK, onto three money matters the candidates did address — retirement plans, taxes and student debt. (I’m skipping Social Security and Medicare because the candidates mostly repeated what they’d said in the August debate, which I wrote about in “At GOP Debate, Social Security Has a Moment.”)
Retirement Plans
CNBC’s Sharon Epperson asked Carly Fiorina what I thought was one of the better questions of the night, particularly for people 50+:
“You were the CEO of a large corporation that offers a 401(k) to its employees. But more than half of American have no access to an employer-sponsored retirement plan… Should the federal government play a larger role in helping to set up retirement plans for these workers?”
Fiorina, whose lack of specific economic policy proposals has surprised me (Don’t believe me? Try to find them on her website), answered:
“No, the federal government should not play a larger role… I think it's a wonderful that businesses start a 401(k). The point I'm making is this: the federal government should not be in a lot of things. There is no Constitutional role for the federal government in setting up retirement plans.”
So, essentially, Fiorina’s advice for the millions of Americans without access to employer-sponsored retirement plans: You’re on your own.
My Next Avenue colleague, Chris Farrell, called this “the biggest disappointing moment of the evening,” adding that “I thought her response was the triumph of ideology over common sense.”
Farrell’s reasoning: “Fiorina’s argument that we should stop looking to the government for solutions to problems didn’t really address the issue. For one thing, the 401(k) already exists and the question is how to expand access to encourage more people to save for their retirement. What’s more, there have been plenty of good solutions offered during Republican and Democratic administrations for helping people save for their retirement.”
Taxes
The candidates revealed a little about how they want to change the tax system, but I was irritated by how much they didn’t say and — sorry Ted Cruz — how their math sometimes didn’t add up.
A flat tax system was all the rage; Carson, Cruz, Sen. Rand Paul and Mike Huckabee all favored one. Sen. Marco Rubio proposed a flat 25 percent tax on businesses of all size.
Carson said his proposed income tax rate of about 15 percent for everyone “works out very well” for the U.S. budget. He assured Americans it wouldn’t increase the deficit because the system, which would tax America’s Gross Domestic Product (the nation’s economic output) and corporate income and capital gains, would spawn so much growth. AP’s fact-checking revealed, however, that Carson was double-counting, since corporate revenues are part of GDP.
Carson also said he would “get rid of all the deductions and all the loopholes.” In the often-repeated word of Ohio Gov. John Kasich last night, that’s fantasy. It’s highly unlikely Congress and the American public would agree to end write-offs for mortgage interest, charitable deductions and retirement savings, to name three.
Cruz said his 10 percent flat tax plan would eliminate the payroll tax, the estate tax (like many Republicans, he calls it the “death tax”) and the business income tax, allowing all citizens to “fill out their taxes on a postcard so we can eliminate the IRS.”
Fiorina didn’t offer a tax plan except to say that she wants to simplify “the 73,000-page tax code” and bring it down to three pages because “three pages is about the maximum that a single business owner or a farmer or just a couple can understand without hiring somebody.”
I’m all for simplifying the tax code, too, but I’d really like to know how Fiorina would do it.
Trump was vague about how he could cut taxes by $10 trillion without increasing the deficit. He said “we’re reducing taxes to 15 percent.”
That 15 percent rate sounded like a flat tax. Actually, it’s just for businesses. Trump’s website calls for four tax brackets: 0 percent, 10 percent, 20 percent and 25 percent (and no estate tax). Under Trump's plan, taxpayers who are single and earn less than $25,000 (married filing jointly earning under $50,000), would owe no tax and would get a one-page tax form “to send the IRS saying ‘I win.’”
CNBC’s John Harwood, who took a lashing last night, asked Jeb Bush a good question. He noted that Bush would cut the top personal income tax rate from 39.6 percent to 28 percent (the top rate under Reagan) but wondered why Bush wouldn't also make 28 percent the tax rate for capital gains (as Reagan did). Sadly, Bush dodged.
“The simple fact is that my plan actually gives the middle class the greatest break: $2,000 per family. And if you make $40,000 a year, a family of four, you don’t pay any income tax at all,” said Bush.
College Debt
To help the boomers' and Gen X's students with crushing college debt — more than 40 million Americans have student loans, Epperson noted, and the U.S. has more than $100 billion in student loan defaults — Kasich had what I thought was a novel idea: “I think we can seriously look at an idea of where you can do public service. I mean legitimate, public service and begin to pay off some of that debt through the public service that you do. And in the meantime, it may inspire us to care more about our country, more about ourselves.”
Then, turning to Bush, Kasich said: “Remember that ‘thousand points of light’ from your dad? We can use a thousand points of light to eliminate some of that debt.”
