In its report on the latest Republican presidential debate, the Washington Post reported that Fox news reporter Britt Hume was "incredulous" that Representative Duncan Hunter thought that trade policy was an important factor in dealing with projected shortfalls in Social Security and Medicare. The article seemed to imply that Mr. Hume's reaction was reasonable. Actually, it is very reasonable to cite trade in reference to these shortfalls. The growth in wage inequality over the last quarter century is responsible for more than half the 75-year shortfall projected by the Congressional Budget Office for Social Security. Increasing wage inequality has caused the share of wage income falling over the taxable cap for Social Security to increase from 10 percent in 1983 to almost 17 percent at present. Trade policy has been an important factor in the rise in inequality. Trade can also be an important factor in reducing inequality. If policy is focused on increasing competition in highly paid professions then a larger share of wage income will again fall underneath the taxable cap. Perhaps more importantly, if trade policy is oriented toward improving the living standards of ordinary workers they will be far less concerned about the possibility that in thirty or forty years they will see the same sort of tax increases they experienced in the decades of the 50s, 60s, 70s, and 80s. Trade can also go far toward alleviating the projected shortfalls in Medicare. If Congress proves incapable of repairing the U.S. health care system, Medicare can reap enormous savings by allowing beneficiaries to buy into the health care systems of the countries with longer life expectancies than the United States. It is surprising that Mr. Hume and the Post are apparently unaware of the importance of trade to these two programs.
--Dean Baker
