This has been a year that most Americans won't soon forget. The coronavirus disease 2019 (COVID-19) pandemic has completely upended social norms, ravaged the U.S. economy, and sent the stock market on its wildest ride in more than a decade.
Yet amid this chaos, an election season is unfolding. In just over four months, Americans across the country will cast their ballots to determine who'll guide the U.S. over the coming four years. This means the next four months will feature the two candidates -- Republican Party incumbent Donald Trump and Democratic Party challenger Joe Biden -- clarifying their positions on key issues and outlining how they plan to improve the lives of all Americans.
Social Security is facing big problems that the president will be expected to tackle
Though there are a lot of issues that are bound to take precedence in 2020, including the economy, COVID-19 response, and social issues, there's little doubt that Social Security will get its moment in the spotlight as these two candidates go head-to-head.
As some of you may already know, Social Security is facing some serious financial hurdles in the years to come. For the past 35 years, the annually released Social Security Board of Trustees report has cautioned that the program wouldn't collect enough revenue over the long term (defined as the 75 years following the release of a report) to cover its expected outlays. Today, Social Security's unfunded obligations have swelled to $16.8 trillion between 2035 and 2094.
With projections calling for the program to completely exhaust its $2.9 trillion in asset reserves by 2035, then-current and future retired workers could see up to 24% of their benefits cut. That's certainly not a negligible amount considering that 62% of all current retirees lean on Social Security for at least half of their monthly income.
While there are, obviously, some pretty big ideological differences between Donald Trump and Joe Biden when it comes to their approach in strengthening Social Security, you might find it somewhat surprising that the two candidates share three similarities when it comes to America's top social program.
1. Both candidates have, at one time, supported the idea of benefit reductions
First off, you might be surprised to learn that, at one time, both candidates favored proposals that would've ultimately reduced benefits.
For example, all four of President Trump's federal budget proposals while in office have featured a reduction in Social Security outlays over the subsequent decade. For fiscal 2018 through fiscal 2021 (a federal fiscal year ends September 30), Trump's budgets would have reduced Social Security outlays over the subsequent decade by $72 billion, $64 billion, $26 billion, and $24 billion, respectively. This would primarily have been accomplished by eliminating perceived inefficiencies with the Social Security Disability Insurance (SSDI) program. Though these proposed reduction amounts are minuscule relative to the total amount of money expected to be outlaid over the next decade, they nevertheless represent an attempt to reduce expenditures.
However, Biden has also previously supported policies that would have reduced outlays. For instance, NBC News reported that, in 2007, when Biden was attempting to secure the Democratic Party nomination for president, he favored the idea of a bipartisan Social Security solution that would raise the payroll tax to collect additional revenue from the well-to-do, while also increasing the full retirement age. A gradual increase in the full retirement age would mean reduced lifetime payouts for future generations of workers.
While both candidates have pledged to protect the integrity of Social Security, they've both offered up proposals that would have resulted in reduced lifetime payouts.
2. Trump and Biden have both loosely tossed around the idea of means-testing
Another intriguing similarity between the two candidates -- and perhaps the one source of common ground that Democrats and Republicans may be able to find on Capitol Hill regarding Social Security -- is they've both loosely tossed around the idea of means-testing for benefits to strengthen Social Security.
Means-testing involves partially or fully reducing an individual's benefits over a certain income threshold. The idea is to keep the rich from receiving benefits if they don't need this income, thereby reducing the program's long-term outlays.
While on the campaign trail prior to his successful 2016 election, Trump kicked the tires on utilizing means-testing as a way of preserving the Social Security program. Trump implied that he and other wealthy individuals aren't reliant on Social Security income and should therefore forgo this payout despite being eligible.
The former vice president is in a similar camp. While speaking at a Brookings event two years ago, Biden mentioned that, "I don't know a whole lot of people in the top one-tenth or 1% or top 1% [who] are relying on Social Security when they retire." While not exactly a ringing endorsement to implement means-testing, it suggests that Biden recognizes what little importance Social Security income plays for the well-to-do.
3. Both of their proposals would strengthen the Social Security program
Lastly, you should understand that despite their differing approaches, both candidates have offered suggestions that would strengthen the Social Security program.
For instance, Joe Biden has stated that he's in favor of raising the payroll tax earnings cap, which sits at $137,700 in 2020. Although this payroll tax cap increases on par with the National Average Wage Index, 6% of working Americans are still earning more than $137,700 in wages or salary each year, and therefore have some of their income exempted from the 12.4% payroll tax. Biden, and the vast majority of Democrats in Washington, D.C., want this cap raised in order to collect additional revenue from high-income earners.
Comparatively, Trump has aligned with his party's primary thesis, which is to reduce Social Security's long-term expenditures. Removing inefficiencies from SSDI and halving retroactive disability pay to six months from the current 12 months for eligible disabled workers would be one way to lower long-term outlays.
Even though Democrats and Republicans are approaching their core fix from opposite ends of the spectrum and their separate fixes do improve Social Security, the fact remains that they would work best together. The GOP's plan takes decades before significant savings are realized, which is why the Democrats' proposal to raise additional revenue immediately through taxation makes so much sense.
Meanwhile, the Democrats' plan fails to account for ongoing demographic changes, including record-low birth rates and lower net legal immigration. That's where the Republicans' long-term cost-savings proposal comes in handy.