Despite this being a chaotic year, it's important to remember that, in 39 days, Americans will be headed to the polls or mailing in their ballots to determine the future path of the United States of America.
There's no question that the ongoing response to the coronavirus disease 2019 (COVID-19) pandemic, as well as strategies to incite economic growth following the first recession in 11 years, are going to dominate the debate stage between Democratic Party presidential nominee Joe Biden and incumbent Republican Donald Trump. But don't be surprised if Social Security becomes a hot-button issue this election, especially with the program facing an estimated $16.8 trillion funding shortfall over the next 75 years.
Though election season is typically when we dig into the details of each candidate's plan to better America, it's also a time when misinformation is at its peak. For current front-runner Joe Biden, this appears to be the case when it comes to his past and present views on Social Security.
Perhaps the biggest question that keeps popping up is this: Has Joe Biden advocated cutting Social Security? The answer, as you're about to see, is a mix of both fact and fiction.
Fact: Biden has been open to solutions that would be akin to Social Security cuts
The fact is there is some truth to the idea that Joe Biden has advocated cutting Social Security benefits in the past. Keep in mind that when I say "cutting Social Security benefits," I'm not talking about Biden taking scissors and lopping off a percentage of monthly benefits to the program's tens of millions of beneficiaries. Rather, the idea of benefit cuts is most often viewed as a way to reduce lifetime benefits paid.
For example, when Biden was vying for the Democratic Party presidential nomination in 2007, he told NBC News that he would be open to the idea of a bipartisan solution to resolve Social Security's long-term cash shortfall. This would include the Democratic Party's core proposal of an increase in taxation on the wealthy (via the payroll tax) to raise additional revenue, as well as the Republican Party's favored solution of gradually raising the full retirement age -- i.e., the age when a retired worker becomes eligible to collect 100% of their monthly payout, as determined by their birth year.
Gradually raising the full retirement age wouldn't change a thing for current retirees or those folks who are close to retirement. It would, however, require future generations of workers, such as millennials and Generation Z, to make a tough decision. They would either need to wait longer to receive their full monthly payout from Social Security or accept a steeper reduction if claiming early. No matter their choice, the amount paid out in lifetime benefits by Social Security would decline. That's effectively a Social Security benefit cut.
Additionally, when speaking at a Brookings event in May 2018, the former vice president made an off-the-cuff remark that implied means testing might be an intriguing idea to save the program money:
Paul Ryan [former Republican speaker of the house] was correct when he did the tax code. What's the first thing he decided we had to go after? Social Security and Medicare. Now, we need to do something about Social Security and Medicare. That's the only way you can find room to pay for it. Now, I don't know a whole lot of people in the top one-tenth of 1% or top 1% [who] are relying on Social Security when they retire.
The idea of means testing involves partially reducing or completely withholding Social Security benefits if an individual or couple surpasses a predefined annual income threshold. In other words, it would keep the well-to-do, who aren't in need of Social Security, from receiving a payout.
Joe Biden was also a key figure in negotiating the 2011-2012 payroll tax holiday that reduced payroll tax collection for workers following the Great Recession. Although transfers from the General Fund ensured that Social Security's lost revenue didn't adversely affect the program's asset reserves, this payroll tax holiday resulted in approximately $110 billion in revenue not being collected over this two-year stretch.
Fiction: Biden's current Social Security proposal calls for cuts to Social Security
While there's some truth to the idea that Biden has advocated for Social Security cuts in the past, there's also quite a helping of fiction. Although the former vice president might still be open to the idea of a bipartisan compromise to strengthen Social Security over the long haul, his campaign proposal to fix the program focuses entirely on collecting additional revenue and expanding benefits for the most at-risk recipients.
Joe Biden's four-pronged approach to resolve the Social Security crisis is to:
- Increase payroll taxation on high earners: In 2020, all earned income (wages and salary) between $0.01 and $137,700 is subject to a 12.4% payroll tax, while earned income above $137,700 is exempt. Under Biden's proposal, a doughnut hole would be created between $137,700 and $400,000 where earned income would remain exempt. But above $400,000, the payroll tax would once again be applicable.
- Lift payouts for aged beneficiaries: For long-lived beneficiaries, medical care and transportation costs can skyrocket as they age. The Biden Social Security plan calls for a 1% increase in the primary insurance amount (PIA) for beneficiaries aged 78 to 82, with the PIA peaking at an aggregate 5% increase. This would result in a modest pay hike for aged beneficiaries.
- Increase the special minimum benefit: The former vice president is also calling for a substantial increase to the special minimum benefit for lifetime low-income workers with between 10 and 30 years of work history. The proposal would increase the special minimum benefit to 125% of the federal poverty line.
- Switch to the CPI-E from the CPI-W: Finally, Biden's proposal calls for a switch of Social Security's inflationary tether. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which does a poor job of tracking the expenses that seniors are contending with, would be replaced with the Consumer Price Index for the Elderly (CPI-E). The CPI-E is an index that specifically tracks the spending of households with persons aged 62 and over.
There's absolutely nothing in this proposal that would cut Social Security benefits or outlays in any way.