Arguably the greatest of all rights in our country is the freedom to vote for what you believe will give your town, county, state, and/or country the best path forward over the long run. In just a little over a week, on Nov. 6, Americans get that opportunity once more. That's right, folks, it's time for midterm elections.
This November, voters will be focused on a number of key issues. For instance, immigration has been, and is expected to remain, a hot-button issue. Other topics might include the ongoing trade war with China and how that's affecting U.S. growth and jobs, tax cuts, the growing federal deficit, and perhaps even the candidates' stance on marijuana. After all, our neighbor to the north did just become the first industrialized country in the world to legalize recreational cannabis.
However, one extremely important issue that'll probably get no air time whatsoever in any Senate or House election is Social Security.
Image source: Getty Images.
Social Security is in big trouble
Every year, the Social Security Board of Trustees releases an annual report detailing the health of the program over the short and long term (10 and 75 years, respectively). This year's report was perhaps the scariest yet.
Although Congress has known since 1985 that Social Security's current payout schedule was unsustainable without additional revenue or expenditure cuts, no major overhaul of the program has been undertaken since 1983. Beginning this year, according to the trustees, the program will expend more than it generates in revenue. Even though the report estimates a mere $1.7 billion net cash outflow, which is peanuts compared with the $2.89 trillion currently in asset reserves, the bigger problem is it demonstrates very clearly that the current payout schedule isn't going to work if left unchanged. By 2034, the trustees estimate that all of the trust's asset reserves will be gone.
Now, understand that the depletion of this excess cash doesn't mean Social Security is insolvent. The program will continue to generate revenue from the 12.4% payroll tax on earned income and, to a lesser extent, from the taxation of benefits. In other words, as long as Americans keep working, payouts will continue to eligible beneficiaries.
What will change is the amount being paid to those beneficiaries. The trustees' report forecasts the need for a cut to benefits of up to 21% in 2034, should Congress do nothing. That's not a comforting forecast, with more than 60% of all retired workers reliant on their monthly payout for at least half of their income.
With so many Americans leaning on Social Security, you'd think resolving the estimated long-term cash shortfall of $13.2 trillion would be priority No. 1 of Congress. Instead, political hubris and President Trump are likely to keep lawmakers from going within 10 feet of Social Security during this election cycle.
Image source: Getty Images.
Politicians fear the consequences of fixing Social Security
Lawmakers on Capitol Hill actually have two pretty big issues when it comes to Social Security.
To begin with, they can't agree on much when it comes to America's most important social program. Though Republicans and Democrats both admit that there's a long-term concern with Social Security, their solutions are on opposite ends of the spectrum. Democrats want to increase revenue by raising or eliminating the maximum taxable earnings cap associated with the 12.4% payroll tax on earned income, whereas Republicans want to gradually increase the full retirement age from its expected peak of 67 in 2022 to as high as age 70.
Essentially, it comes down to raising additional revenue or cutting long-term expenditures. The problem is that both solutions would resolve the program's long-term cash shortfall, which gives neither party any incentive to find common ground with their opposition. Thus, there's been a long stalemate in Washington over how to fix Social Security.
The other perhaps more prominent issue is that no matter the solution, some group of folks is going to lose. If Democrats were to get their way, the wealthy would pay more into the system without seeing an extra cent in benefits come retirement. Meanwhile, if the GOP had its way, future generations of retirees would see their lifetime benefits potentially shrink.
Because all Social Security solutions result in a loser, lawmakers fear that this could look bad around election time and cause them to lose their elected seat in the House or Senate. It's for this unfortunate reason that you're unlikely to hear anything about Social Security reform this election cycle.
President Trump boarding Air Force One. Image source: Official White House photo by Joyce N. Boghosian.
Trump has been adamant about leaving Social Security alone
However, you shouldn't discount the role President Trump is playing as well in keeping Social Security out of the spotlight.
During his campaign and since taking office, Trump has vowed to not directly change anything about the Social Security program. He's indirectly chosen to focus on economic growth through tax cuts to spur higher wages and job creation. The thinking is that higher wages and more jobs will lead to an increase in payroll tax revenue, thereby offsetting some of the concern surrounding Social Security. Last year, the payroll tax accounted for more than 87% of the $996.6 billion collected for the program.
Trump is likely to do everything in his power to keep midterm elections from turning to Social Security. By taking such a hardline stance that Social Security and Medicare reforms are off limits, he's removed the possibility of any discussion for lawmakers in Congress.
Thus, while Social Security should be a priority discussion during midterms, it's not even close to being a back-burner issue because of political hubris and Trump's hard-line "hands-off" stance.
