In January, more than 63 million people received a Social Security benefit check, many of whom are retired workers. Of these retirees, over 15 million were pulled above the federal poverty line solely as a result of their guaranteed monthly payout from the program. Without the financial foundation that Social Security provides, we'd likely be dealing with a serious elderly poverty problem right now.
But this is also a program that's in disarray. The latest Social Security Board of Trustees report has forecast an imminent shift that'll see more money expended by the program than is collected in revenue for the first time since 1982. In other words, ongoing demographic changes have made the existing payout schedule unsustainable over the long run. And if nothing is done to address Social Security's cash shortfall soon, a substantial benefit cut of up to 21% could be passed along by 2034.
On Capitol Hill, few lawmakers will deny that the program needs a little TLC. But how best to resolve Social Security's issues is a subject of great debate.
President Trump preaches a hands-off approach to Social Security
President Trump has long believed that Social Security shouldn't be directly amended.
In fact, Trump had this to say about so-called entitlement programs like Medicare and Social Security during the 2013 Conservative Political Action Conference: "As Republicans, if you think you are going to change very substantially for the worse Medicare, Medicaid, and Social Security in any substantial way, and at the same time you think you are going to win elections, it just really is not going to happen ... What we have to do and the way to solve our problems is to build a great economy."
In easy-to-understand terms, Trump believes that directly altering Social Security will cost the political party that does so an upcoming election. That's because all direct solutions to tackle Social Security's cash shortfall would result in at least some group of people, whether it be the wealthy or younger working Americans, being in worse shape than before the changes were made.
Instead, Trump has preached a consistent message on Social Security for nearly four years now. Namely, that strengthening the economy is the best way to improve the outlook for America's most important social program. Since the 12.4% payroll tax on earned income accounted for nearly 88% of the $996.6 billion in revenue collected for the program in 2017, better economic growth that creates jobs and lifts wages should increase the amount of payroll tax collected. Thus was born the Tax Cuts and Jobs Act (TCJA), which was signed into law in December 2017. Though the TCJA is targeted at economic growth, it should, in the Trump administration's view, also provide benefits to Social Security.
Did Trump just break one of his biggest campaign promises?
Although the TCJA has indeed provided a short-term boost, it's not a long-term fix for Social Security. Perhaps that was the motivation behind the president's 2020 fiscal budget proposal (released on March 11) that, on the surface, appears to have broken a key campaign promise.
Contained in Trump's 2020 budget are a number of proposals to cut spending for Medicaid, Medicare, and Social Security -- the last of which amounts to a $26 billion reduction over the next 10 years. More specifically, Trump called for the halving of retroactive Social Security disability insurance payment eligibility to six months from 12 months, which would save an estimated $10 billion between 2020 and 2029. Additional inefficiencies would be eliminated to drive total savings for the program to $26 billion over 10 years.
Believe it or not, this isn't the first time during Trump's presidency that he technically broke his Social Security promise. In May 2017, the president's fiscal 2018 budget featured a proposed $72 billion reduction to Social Security spending over the next decade. As with his 2020 proposal, a majority of these savings were to be realized through cuts to the Social Security Disability Insurance program.
Then again, Trump isn't alone in calling for long-term spending cuts to Social Security. President Obama in 2013 outlined a budget proposal that would have reduced Social Security benefits by approximately $230 billion over the decade to come in order to help lower the federal deficit.
On the surface, yes, it does look as if Trump has gone back on his word not to suggest direct changes to Social Security. However, there's more to it than that.
There's a big difference between a rough draft and an enacted spending bill
What you have to understand is that presidential budget proposals are nothing more than rough drafts designed to be a starting point for discussion in the House and Senate. Every year the president puts forth a sort of idealistic approach of what he'd like to see happen, and the final product that's passed by the House and Senate rarely resembles this rough draft. At no point have any of the above-mentioned long-term reductions to the Social Security program been signed into law via a federal spending bill.
You should also be aware that a divided Congress significantly lessens the chances of any substantive Social Security cuts being signed into a federal spending bill. Although Republicans control the Senate and White House, and they generally favor a long-term reduction in program expenditures, the Democrat-controlled House prefers an expansion of the revenue base by increasing taxes on the wealthy. Without House approval, there's virtually no chance that any proposal to reduce Social Security benefits in any form would pass muster.
While the 2020 federal budget has left plenty of room for debate on Capitol Hill, Social Security cuts are almost certainly off the table.