Social Security, our nation's most prized social program, is responsible for providing benefits to over 46 million retired workers each month and is singlehandedly pulling more than 15 million of those retirees out of poverty. It's also a program that's in some pretty big trouble.
Since 1985, the annually released Social Security Board of Trustees report has cautioned that the program's long-term (75-year) outlays wouldn't cover projected revenue collection. As of 2020, Social Security's unfunded obligations through 2094 had ballooned to a whopping $16.8 trillion. Without intervention from Capitol Hill, retired workers could face sweeping benefit cuts of up to 24%, beginning in 2035.
There's no question Social Security needs some help, and that's expected to start at the top, with President Trump. For the most part, Trump has maintained a hands-off approach with Social Security, choosing instead to indirectly influence the program by attempting to boost payroll tax collection via lower corporate and individual tax rates. But make no mistake about it -- even though Trump has largely avoided calling for direct policy changes to Social Security, he's previously suggested cutting benefits three separate ways.
Eliminating waste in the SSDI program
To begin with, each of President Trump's federal budget proposals while in office have called for an overhaul of the Social Security Disability Insurance (SSDI) program, which was providing benefits to nearly 9.8 million people, as of August 2020. This overhaul focused on eliminating wasteful spending within SSDI, as well as reducing retroactive benefits paid to eventually approved beneficiaries from a period of 12 months to six months.
Since presidential budget proposals estimate the economic impact of fiscal policy actions for a period of 10 years, Trump's federal budgets were expected to reduce SSDI outlays by the following amounts over the subsequent decade (a federal fiscal year runs Oct. 1 through Sept. 30):
There are two things worth noting here. First, these figures are a drop in the bucket relative to what Social Security is expected to outlay over the next decade. According to estimates, Social Security is estimated to expend more than $15 trillion, in aggregate, over the next 10 years. This means a $24 billion to $72 billion outlay reduction to resolve perceived inefficiencies in the SSDI program represents a mere fraction of total outlays.
Second, presidential budget proposals have historically represented nothing more than a starting point for more thorough budget discussions in Congress. This is to say that none of Trump's four proposals were ever given much credence as concrete spending plans.
A call for means testing
Another pathway to Social Security benefit cuts, loosely proposed by President Trump while on the campaign trail four years ago, is means testing, which would partially or fully phase-out benefits for individuals who earn more than preset income thresholds. In other words, it would keep well-to-do seniors from receiving a full benefit or perhaps any benefit at all, if they aren't reliant on their Social Security income to make ends meet.
Trump has previously suggested that he wouldn't take a Social Security benefit and that other wealthy individuals should follow suit. However, without seeing Trump's tax returns, it's unknown whether or not the president is currently receiving a monthly payout from the program.
Additionally, it's worth pointing out that President Trump has never made means testing for Social Security benefits an official proposal. It was merely a discussion point tossed out by Trump prior to his 2016 election as a way to reduce Social Security's long-term outlays.
Interestingly, means testing might be one of the few Social Security changes America's politically divided Congress could agree on. Although Democrats are generally against the idea of any policy changes that would result in Social Security benefit cuts, reducing outlays to the highest-earning seniors might be something they'd consider. To add, means testing is something that Democratic Party presidential nominee and current polling front-runner Joe Biden has tossed around as a Social Security solution in the past.
A partial or permanent elimination of the payroll tax
The third and most recent example of President Trump's call for Social Security benefit cuts involves his pursuit of a partial or permanent cut to the payroll tax. The 12.4% payroll tax on earned income (wages and salary, but not investment income) was responsible for $944.5 billion of the $1.06 trillion that Social Security collected in 2019.
In an effort to combat the economic struggles tied to the coronavirus disease 2019 (COVID-19) pandemic, Trump signed an executive order in mid-August that deferred payroll tax collection between Sept. 1 and Dec. 31. This deferral was designed to beef up workers' paychecks for the remainder of 2020 but have those same workers repay what was deferred in 2021. Some states and businesses have chosen to opt out of the voluntary deferral program.
President Trump has also tossed around the idea of permanently eliminating the payroll tax, if reelected. This would allow workers to receive beefier paychecks but would remove the most critical source of Social Security's funding. It should be pointed out that while Trump has mentioned the idea of eliminating the payroll tax on more than one occasion, no one else in his administration has taken the idea seriously, as it would leave a gaping hole in the Social Security program. Neither Democrats nor Republicans would be in favor of eliminating the payroll tax.