We can’t lose sight of the need to reform Social Security and make it financially sustainable.
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With the political conventions of both major parties scheduled in the next few weeks, it’s a good time to look at the positions the presidential candidates and political parties hold on Social Security. It’s also a particularly opportune time, since August 14th is Social Security’s 85th birthday: The Social Security Act was passed on this day in 1935.
So, let’s look at how our leaders propose to improve this essential program.
Social Security is a valuable program for millions of Americans
It almost doesn’t need to be said, but it’s important to point out that Social Security is essential to the financial security of most older Americans and their families. According to the Social Security Fact Sheet, in 2020, 65 million Americans will receive more than one trillion dollars in Social Security benefits. For most of the elderly in this country, Social Security is their major source of income.
Social Security benefits are also the main reason that poverty among the elderly has fallen significantly in the 85 years since the program began. It’s certainly the main reason that the poverty rate for the elderly is lower than the rate for other age groups.
Despite how critical it is, the latest Social Security Trustees Report projects that the Trust Fund will run out of money by 2034, which has caused a lot of concern about the future viability of the program.
Positions held by Joe Biden and the Democrats
Biden’s campaign website contains specific proposals for Social Security regarding both the system’s finances and the benefits paid to beneficiaries. His proposals would improve the system’s finances by increasing payroll taxes on the most affluent workers. These proposals would also improve benefits for the very elderly, protect low-income workers with a minimum benefit, and protect widow and widowers from experiencing a significant loss of income upon the death of the first spouse.
An analysis by the Penn Wharton Budget Model (prepared by researchers at the University of Pennsylvania) estimates that Biden’s plan would reduce Social Security’s long-term deficit from 3.5% of taxable payroll to 2%. So there would still be a remaining deficit even if his proposals were adopted. The Penn Wharton analysis also estimates that Biden’s proposals would inhibit capital formation, thereby reducing GDP by .6% in 2030.
Positions held by Donald Trump and the Republicans
In the 2016 presidential campaign, President Trump promised not to reduce Social Security benefits. His 2020 campaign website contains no statements about his position on Social Security benefits.
Trump has repeatedly asserted that Social Security’s financing can be improved by increasing the productivity of the economy, and he cites the 2017 tax cuts as one mechanism to accomplish that goal. Unfortunately, the downturn in the economy caused by the pandemic will increase Social Security’s funding challenges.
Trump and other Republicans have repeatedly discussed the importance of reducing federal entitlement programs to manage the federal deficit. The largest federal entitlement programs are Social Security, comprising about 23% of federal spending, and Medicare/Medicaid/healthcare subsidies, comprising about 25% of federal spending. If Trump and the Republicans are serious about reducing spending on entitlements, they must reduce spending on Social Security and Medicare. In fact, over the years, Republican law makers have introduced bills that reduce Social Security’s funding deficit primarily by cutting benefits. Today, however, Trump is silent on how he would reduce spending on Social Security benefits.
One thing Trump isn’t silent about is that he wants to reduce or eliminate payroll taxes that support Social Security, and he recently proposed a suspension of payroll tax collections for the remainder of 2020.
It’s hard to imagine how a reduction in payroll taxes will help improve Social Security’s finances. In fact, some critics believe Trump’s proposals are really designed to “starve the beast” and bring about significant benefit reductions.
The bottom line
There is no painless, magical way to fix the Social Security deficit without somebody paying a price. To make Social Security sustainable for the long term, some people will need to pay more in taxes, and some people will need to receive less in benefits.
The last time we had a funding crisis with Social Security (1983), a Republican President (Reagan), a Republican Senate, and a Democratic House adopted a bipartisan compromise consisting of tax increases and benefits reductions. Today, there are many respectable proposals that have been suggested that would improve the system’s funded status, including comprehensive proposals from the BiPartisan Policy Center.
Of the two major parties, Biden and the Democrats have outlined the most specific proposals that we can understand and analyze that will help make Social Security sustainable and meet the future needs of Americans. But their proposals still leave Social Security with a substantial deficit.
The only specific proposal from Trump would decrease the system’s funded status by billions of dollars. At this time, Trump and the Republicans have released no specific or serious proposals to improve the system’s funding or better meet the needs of American retirees and their beneficiaries.
Yes, we have serious challenges facing our nation today with the COVID-19 pandemic and the resulting economic fallout. And these crises are exacerbating the challenges facing our Social Security system. But we can’t lose sight of the need to reform one of the most popular government programs in order to protect our futures.