Former Vice President Joe Biden is running campaign ads that claim President Trump “signed an executive action directing funding cuts for Social Security” and “proposed slashing hundreds of billions of dollars from the Social Security Trust Fund every year.”
The problem is, however, that this just isn’t so.
“A Biden campaign TV ad falsely claims that a government analysis of President Donald Trump’s ‘planned cuts to Social Security’ shows that ‘if Trump gets his way, Social Security benefits will run out in just three years from now,’” says FactCheck.org.
The cliche “politics ain’t beanbag” exists for a reason: Campaigns use overhyped rhetoric to distort their opponent’s positions and make them appear less electable. Seniors should rest easy and understand that their Social Security benefits aren’t going anywhere.
But this dynamic of misleading charges belies a more fundamental problem: Something will eventually need to be done to buttress Social Security’s finances. Episodes like this don’t bode well for future attempts to reform Social Security.
The Biden Campaign’s Questionable Social Security Claims
The Biden camp justifies its claims about President Trump’s “proposed cuts” to Social Security by pointing to the Trump administration’s recent efforts to implement a payroll tax holiday as part of the ongoing efforts to blunt the economic impact of Covid-19. Payroll taxes help fund Social Security, but they are not synonymous with the program.
In August, the CARES Act’s supplemental $600 weekly unemployment benefit ran out. Negotiations for a second stimulus package among the White House, the House Democrats and the Senate Republicans were going nowhere fast. In response to the deadlock in Congress, President Trump enacted a payroll tax holiday by executive order.
Ending the payroll tax has been something of a pet goal for President Trump, even though economists say it won’t do much to alleviate the pain endured by laid-off workers.
“At the end of the year, the assumption that I win, I’m going to terminate the payroll tax, which is another thing that some of the great economists would like to see done,” Trump said in mid-August. His political team tried to clarify and massage those comments later, saying Trump was referring to his executive order to defer payroll taxes.
At the end of August, the chief actuary at the Social Security Administration penned a letter saying that removing payroll taxes would cause funding for Social Security to run dry by the middle of 2023.
While Trump has talked fast and loose about nixing the payroll tax, he has also said he’d support replacing that revenue with money from the government’s general fund. And for the record, President Trump hasn’t supported actual legislation that would change how Social Security is funded.
The Social Security Administration actuary also wrote that if Social Security’s trust funds received transfers from the general fund (as it did in 2010, 2011 and 2012), then “the projected depletion date of the trust fund reserves would be essentially unaffected.”
President Trump’s Record on Social Security
In 2016, the president distinguished himself from other Republicans by promising to leave Social Security alone. Over the past four years, he’s pretty much done just that.
There have been no Bush-like privatization plans from the Trump administration, no Simpson/Bowles-inspired murmings over cutting benefits or raising the full retirement age. There’s been no real plan to do much of anything. The Biden campaign ad is as close as there’s been to a controversy, and even that misrepresents the president’s aims.
Should Trump win in November you can expect more of the same.
“I haven’t seen anything discussed on Social Security reform,” Andrew Biggs, a research fellow at the conservative-leaning think tank AEI told Forbes Advisor. “The president has argued against any Social Security benefit cuts but hasn’t waded into how Social Security’s long-term funding should be secured.”
While this should assuage any fears about changes to the Social Security status quo and soothe soon-to-be retirees worried about cuts to their monthly checks, it’s less than ideal that the Trump administration has no plans to shore up Social Security’s long-term finances.
Social Security’s Long-Term Prospects
Assuming no changes are made or new policies are enacted, the Social Security Trust Fund will be depleted by 2035, according to the most recent Trustees Report. If that were allowed to happen, beneficiaries would still receive about three-quarters of their regular monthly checks, thanks to funding from the payroll tax.
This would create a huge cash crunch for millions of seniors, notes the director of Boston College’s Center for Retirement Research Alicia Munnell.
“Relying only on current tax revenues, however, means that the replacement rate—benefits relative to pre-retirement earnings—for the typical age-65 worker would drop from 36% to about 27%—a level not seen since the 1950s,” Munnell wrote in a recent report.
Unlike other big policy issues, Social Security isn’t terribly complicated to solve, Munnell told Forbes Advisor. You either need to increase revenue to keep benefits constant, or cut retirees’s benefits—neither solution would be politically popular. Politicians on both sides of the aisle need to take the issue seriously and get the buy-in needed to make necessary changes.
“To touch that system, there has to be a sense of confidence of an orderly process,” she said.
Confidence not only means avoiding spurious campaign claims but also having political leaders demonstrate that they understand how critical Social Security is to the lives of seniors across the country. Hopefully, Washington will get the message before it’s too late.