Ready or not, election season is beginning to ramp up, more than a full year ahead of the presidential election on Nov. 3, 2020. The future of a lot of programs and government spending is clearly on the line.
Near the top of the list of concerns for the American public is the future of Social Security. Although Social Security has been a financial pillar since it was signed into law more than 84 years ago, the latest annual Trustees report, and the 33 before it, haven't painted the brightest outlook for our nation's most successful social program.
According to the Trustees report, Social Security's more than $2.9 trillion in asset reserves (that is, its net-cash surpluses built up since inception) are expected to be completely exhausted by 2035 as the result of numerous ongoing demographic changes.
On the bright side, Social Security doesn't need a dime in reserves to continue making payouts to its beneficiaries. Its recurring sources of income -- the 12.4% payroll tax on earned income, and the taxation of Social Security benefits -- ensure that money will always flow into the program for disbursement to eligible beneficiaries. On the other hand, retired workers could see their benefits cut by up to 23% if the program's cash shortfall isn't dealt with pretty soon.
Would Donald Trump ever cut Social Security?
This leads to the question: If President Trump is reelected to a second term, would he aim to resolve Social Security's financial shortcomings by cutting benefits?
Obviously, there is no concrete yes or no answer here, given all the variables that we just don't know yet. We don't know if Trump will be elected to a second term as president, and we don't know with any certainty what he'd do about Social Security if he was. But we do have plenty of clues that suggest what The Donald's game plan would be if he remained in the Oval Office until January 2025.
However, before we dig into these clues, I think it's important to understand exactly what's meant by "cutting Social Security benefits." Cutting benefits does not mean taking the metaphorical scissors and suddenly paying everyone less across the board. Only a very small fraction of Americans would stand behind such a measure, and no politician in their right mind would propose such an idea.
Rather, "cutting benefits" involves a methodical and gradual reduction in lifetime payouts from the program.
As an example, Republicans have long favored the idea of gradually raising the full retirement age as a means of resolving Social Security's long-term cash shortfall. Your full retirement age is the age at which you become eligible to receive 100% of your monthly payout, as determined by your birth year; it's currently set to peak at age 67 for those born in 1960 or later. Certain members of the GOP, though, have suggested gradually raising the full retirement age to 70.
If that happened, current and near-term retirees would see absolutely no change in their monthly payout or lifetime collection. However, future retirees (millennials, for example) would need to either wait longer to receive their full payouts, or accept a steeper reduction to their monthly benefits by claiming early. No matter what their choice, the lifetime benefits collected by future retirees would be reduced, thereby saving the program money over the long run. This is what "cutting benefits" is all about.
The case against Trump reducing Social Security benefits
Now, back to the question at hand: Would Donald Trump cut Social Security benefits?
On one hand, there's evidence to suggest that Trump would avoid all attempts at direct changes to the program. For one, the president said during his campaign for his first term that he wouldn't touch Social Security benefits while in the Oval Office.
Furthermore, Trump's comments at the Conservative Political Action Conference (CPAC) in March 2013 spoke volumes about his views on direct changes being made to the program:
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 we solve our problems is to build a great economy.
In other words, Trump identified that direct changes to the Social Security program will result in some group of people being worse off than before. Whether it's the rich paying more in tax or millennials having to work longer to receive their full payout, no changes to the program can be made without some group of people being worse off. That makes direct changes to Social Security an election liability for Republicans (and Democrats), something that Trump would prefer to avoid.
Instead, Trump has focused his attention entirely on growing the U.S. economy. His hallmark legislation to date, the Tax Cuts and Jobs Act, was a sweeping overhaul of the U.S. tax code that reduced tax liability for most workers and corporations. The idea here was that a stronger economy will lead to higher worker income and wages, and therefore more payroll tax collection, thereby improving the outlook for Social Security. While this has, indeed, been the case in the short term, Trump's indirect approach will badly fail the long-term sniff test.
The case for Trump cutting program benefits
On the other hand, there are clues to suggest that Trump, if reelected, would consider direct cost-reduction measures.
For example, in March, Trump released his 2020 fiscal budget proposal. Contained within that proposal, which looked out 10 years, was a $26 billion reduction in funding for Social Security. A good portion of this outlay cut would be derived from reducing retroactive pay collection for disabled workers from the current 12 months to six months. For context, Social Security will likely outlay well over $10 trillion over the next decade, so $26 billion in "cuts" is relative peanuts. Nevertheless, suggesting a cutback in any form of Social Security spending, even disability outlays, breaks the president's campaign pledge not to reduce Social Security benefits.
Secondly, Trump's appointment of Mick Mulvaney as director of the Office of Management and Budget cannot be overlooked. Mulvaney is a fiscal conservative who isn't afraid to make tough choices, and he has, on numerous occasions in the past, suggested that entitlement cuts are on the table as a means to balance the federal budget. Mulvaney was also the architect of the 2011 Balancing Our Obligations for the Long Term Act (BOLT Act), which sought to balance the budget through entitlement-program reconciliation. The fact that Trump's budget director is such a deficit hawk should raise some eyebrows.
Third and finally, The Washington Post reported in July that, according to five people in on the discussion, Trump had briefed his aides to "look for big spending cuts" during his second term. While it's unclear exactly where these cuts could come from, deriving them from Social Security certainly appears to be on the table.
So, what's the verdict?
Keeping in mind that we don't know many of the pertinent variables at this point, no answer is going to be concrete. What I will say, though, is that the president's 2020 budget proposal and his recent discussion with his aides are telling about what might happen during a second term.
If President Trump were to take his own advice from the 2013 CPAC, he wouldn't dare approach Social Security reform before the upcoming election. But if he should be elected to a second term, tackling direct reforms would only have the potential to hurt members of Congress who are up for reelection, and not him personally. That may very well entice the president to consider a more active solution to Social Security's long-term cash shortfall.
However, there is one variable throughout all of this that can't be overlooked and appears far more certain: the U.S. Senate.
In order to amend Social Security, 60 votes would be needed in the Senate. It's been four decades since either party had a working supermajority for more than a few months in the upper house of Congress, so any and all legislation would need bipartisan support. Senate Democrats have been pretty clear that they don't intend to support legislation that reduces lifetime benefits to future generations of workers, which would, effectively, kill any direct reform attempts by President Trump.
Obviously, there are a lot of variables that need sorting before the target question -- Will Trump cut Social Security benefits? -- can be answered. But over the next year, we should have a clearer picture at what the future holds for both President Trump and the Social Security program.