With Vermont Senator Bernie Sanders (I-Vt.) halting his presidential election campaign a little more than a week ago, the 2020 presidential showdown is set. Former Vice President Joe Biden is now a veritable shoo-in to win the Democratic Party nomination, while Republican incumbent Donald Trump will aim to remain in the Oval Office for a second term.
Though there are a plethora of issues likely to take center stage for these candidates, such as the coronavirus disease 2019 (COVID-19), the economy, and jobs, one topic that's now of clear concern is what will happen to the Social Security program once the 2020 election is decided. You see, both Donald Trump and Joe Biden have, at one time or another, called for cuts to the Social Security program.
While calling for no direct involvement, Trump's budgets aim to cut disability outlays
Through the first three-plus years of his first term, President Trump has preached the idea of a hands-off approach with Social Security. In other words, he's advocated against direct policy changes to the Social Security program in favor of measures that will improve economic growth, such as the passage of the Tax Cuts and Jobs Act in December 2017. Since the payroll tax on earned income is Social Security's biggest revenue generator, improved economic growth could, in theory, buoy it in the short term.
However, while advocating against direct changes to the program, Trump's presidential budget proposals in each of the past four fiscal years have called for Social Security outlay reductions. By fiscal year (the federal fiscal year runs October 1 to September 30), the 10-year reduction to Social Security's expenditures would be:
- Fiscal 2018: $72 billion
- Fiscal 2019: $64 billion
- Fiscal 2020: $26 billion
- Fiscal 2021: $24 billion
It's worth noting that Trump's presidential budgets weren't targeting cuts to retired-worker benefits. Rather, the majority of these savings would be derived from eliminating perceived inefficiencies with the Social Security Disability program.
Beyond budget proposals, Trump has also loosely called for the idea of means testing for benefits. With means testing, benefits would be reduced or eliminated completely based on the income level of a retired person or couple. This is an idea that Trump mentioned on the campaign trail prior to being elected in 2016.
Additionally, it can't be overlooked that Republican ideology favors a long-term reduction in Social Security expenditures to strengthen the program. Most members of the GOP favor gradually increasing the full retirement age from 67 to as high as age 70 in order to account for increased longevity. Such a move would require future generations of retirees (e.g., millennials) to either wait longer to receive their full monthly payouts or claim early and accept an even steeper reduction to their monthly benefits.
Biden stresses he won't cut Social Security benefits, but his track record says otherwise
Former Vice President Joe Biden has taken a similar tone as President Trump in suggesting that, if he were elected, Social Security recipients wouldn't have to worry about cuts. In fact, in an interview on an episode of MSNBC's Morning Joe in January 2020, Biden emphatically stated, "No. No. No. No!" when asked if he'd directly cut benefits if he became president.
From an ideological perspective, this admission is easy to believe. After all, most Democrats believe that the best way to strengthen the Social Security program is by increasing revenue, not reducing expenditures. However, Biden's track record shows that he hasn't always followed this strategy.
For instance, in 1995, when Biden was a Delaware Senator speaking on the Senate floor, he laid out the idea of freezing Social Security outlays. Though Biden has defended his remarks as being made in an effort to avoid a government shutdown, the following statement has received a lot of criticism. Said Biden:
For example, I'm going to go on record. I'm up for reelection this year, and I'm going to remind everybody what I did at home, which is going to cost me politically. When I argued that we should freeze federal spending, I meant Social Security, as well. I meant Medicare and Medicaid. I meant veterans benefits. I meant every single solitary thing in the government. And I not only tried it once -- I tried it twice, I tried it a third time, and I tried it a fourth time. Somebody has to tell me in here how we're going to do this hard work without dealing with any of those sacred cows, some deserving more protection than others.
Joe Biden also played a key role in working with Republicans to orchestrate the payroll-tax holiday in 2011 and 2012. Normally, the 12.4% payroll tax applies to earned income below a certain threshold ($137,700 in 2020), with the self-employed paying the full 12.4% and employers and employees splitting the difference at 6.2% each. In 2011 and 2012, with the U.S. economy still reeling from the worst recession in 70 years, Biden helped negotiate for a 2 percentage point decrease in employer and employee payroll tax liability. This wound up reducing the amount of payroll tax collected by Social Security by more than $109 billion (in total) over this two-year period.
No matter who wins the presidency, near-term Social Security benefit cuts are unlikely
Between Biden's track record on Social Security and Trump's presidential budget proposals, it's easy to see why current and future Social Security recipients are worried. But there is a bit of good news I can pass along: There's virtually no chance of near-term benefit reductions to Social Security, no matter who is elected as president.
One thing that's absolutely necessary if the Social Security Act is going to be amended is for 60 "yes" votes in the Senate. The problem is that it's been more than 40 years since either major U.S. political party had a supermajority of at least 60 seats in the upper House of Congress. This means that any legislation concerning Social Security would need bipartisan support. Put plainly, Senate Democrats have no intention of supporting legislation that reduces program outlays. Likewise, the Democrat-led House won't vote in favor of such a measure, either.
Social Security reform is also off the table given that it's an election year. One of the painful truths about fixing Social Security is that, no matter the solution, some group of people are going to be worse off than before. Whether it's high-income earners or future generations or retired workers, there's no way to raise additional revenue and/or reduce program outlays without some group being worse off. Knowing this, lawmakers aren't going to target reforms when their elected seats on Capitol Hill are up for grabs.
Lastly, it's important to remember that Social Security is incapable of going bankrupt. Even though there are some truly scary reports about a long-term cash shortfall with Social Security, its two recurring sources of revenue -- the payroll tax and taxation of benefits -- ensure that there will always be money to disburse to eligible beneficiaries.
Do pay close attention to the candidates' Social Security strategies in the months that lie ahead, but take solace in knowing that your payout will still be waiting for you, whether you're currently retired or planning to retire in 50 years.