Fixing Social Security Is a Piece of Cake
Fixing Social Security Is a Piece of Cake
The policy is easy, and the politics aren't even that hard.
We have once again reached the point we do in almost every presidential campaign, when for a brief moment we have a “debate” about cutting Social Security and Medicare. We’re going to put Medicare aside for today and focus on Social Security, but the pattern goes like this:
The Republican candidate suggests he’d like to cut Social Security and Medicare, or restrict benefits in some way.
Democrats say “Aha! They want to cut Social Security!”
Realizing the screw-up he has just committed, the Republican candidate says “Of course I don’t want to cut Social Security! How dare you suggest such a thing!”
Deficit scolds rush to the op-ed pages to proclaim that the system is “going broke” and demand that officials have the courage to “fix” it before it collapses.
This repeated cycle doesn’t produce any new policies or legislation, leaving the impression that the Republicans who want to cut benefits are the only honest and courageous actors involved, thwarted only by the cruel and dishonest politics of the issue (cue mentions of “the third rail of American politics”).
One might be left with the impression that Social Security presents a difficult policy challenge, full of layers of complexity and political minefields. That is not true. The political obstacles to securing the system are real, but hardly impossible to overcome. And the policy changes necessary could barely be simpler. This is not like health care reform or immigration; fixing Social Security would actually be a piece of cake, if we decided to do it.
What we really have here is a fundamental clash of values, as we can see in the latest controversy. Let’s examine that before we get to the policy wonkery.
Trump sticks his foot in it
This began when Donald Trump, speaking to a friendly interviewer on CNBC, was asked whether he had “changed your outlook on how to handle entitlements, Social Security, Medicare, Medicaid?” He responded, “First of all, there is a lot you can do in terms of entitlements, in terms of cutting, and in terms of, also, the theft and bad management of entitlements. Tremendous bad management of entitlements. There’s tremendous amounts of things and numbers of things you can do.” Ordinarily, when bullshitting on a subject he doesn’t really understand in the way he obviously was, Trump usually adds “We’re looking at that very strongly”; for some reason he refrained this time.
Smarter people in his party rushed to whisper “Ixnay on the uts-cay!” into Trump’s ear, and he was soon backtracking. Naturally, the Biden campaign pounced:
This highlights something important: The most prominent people in the Republican Party do in fact want to cut Social Security benefits in one way or another. For instance, nearly every candidate in the recent Republican primaries — Trump, Nikki Haley, Ron DeSantis, Tim Scott, Mike Pence — either during the campaign or in the past had suggested cutting benefits or raising the retirement age. Oftentimes they just say vague things like “We need to change how the system works for young people,” but those are the only options they’ll entertain. The other path — increasing payroll taxes — is something they won’t consider.
What’s really at work here is a fundamental clash of values. Conservatives fought bitterly against the creation of the program, calling it “socialism” that would destroy the character of America;1 one Republican senator warned in 1935 that if the bill passed, it would “end the progress of a great country and bring its people to the level of the average European.” They would say the same things three decades later as they fought against the creation of Medicare and Medicaid.
Yes, they pledge that they’ll keep Social Security safe, and say they only want cuts to make sure it’s there in the future. They’ve learned from the political disaster of George W. Bush’s 2005 attempt to partially privatize the program that they have to tread carefully around it. But the whole idea of government-provided pensions violates conservative ideology. Which is why every once in a while you’ll see someone like the bizarrely popular far-right video whiner Ben Shapiro say “No one in the United States should be retiring at 65 years old. Frankly, I think retirement itself is a stupid idea unless you have some sort of health problem.”
Social Security just sticks in Republicans’ craw, which is why they periodically come back to suggesting things that will make the program less generous or cover fewer people. If you can’t eliminate a program you dislike, at the very least you can try to make it less attractive and popular.
The truth: fixing Social Security is easy
Before we go farther, let’s make this clear: Social Security is one of the great policy triumphs in American history. Before its enactment, old age was nearly synonymous with poverty; unless you were wealthy, once you could no longer work you were fated for years of destitution before your death. Social Security ended that, and while its benefits don’t give anyone a life of luxury, they allow people to maintain some measure of, well, security. From the Center on Budget and Policy Priorities:
Most people aged 65 and older receive the majority of their income from Social Security. Without Social Security benefits, 38.7 percent of older adults would have incomes below the official poverty line, all else being equal; with Social Security benefits, only 10.2 percent do. The benefits lift 16.5 million older adults above the poverty line, these estimates show.
But it does face a basic challenge: Since it’s a pay-as-you-go program (with current workers funding benefits for current retirees), the increasing number of beneficiaries, particularly with the retirement of Baby Boomers, has strained the system. For a long time the system amassed a surplus that could be used when payroll taxes didn’t cover all the benefits; we started drawing that surplus down in 2021.
The Social Security Trustees issue a report every year, and the latest one says that the system will be able to pay 100 percent of benefits through 2033; thereafter, it will be able to pay only 77 percent of benefits. This is the point at which we have to note that the fund is not “going broke,” and the panic-mongers who say “Social Security will be broke in a decade” are lying. “Broke” would imply that the system can pay nothing to anyone, which will never happen. That’s not to say getting only 77 percent of your benefits wouldn’t be bad, because it would. But 77 percent is a lot more than 0 percent.2
So how do we make up the shortfall? Yes, we could raise the retirement age or cut benefits. Or we could raise more taxes. Doing so has two simple pieces.
The first is to raise the cap. Right now, all of us only pay the payroll taxes that fund Social Security and Medicare on the first $168,600 of our income (that’s the 2024 cap; it adjusts every year for inflation). What that means is that a janitor making $40,000 pays payroll taxes on every penny they earn, while a hedge fund manager making $16.9 million only pays payroll taxes on 1 out of every 100 dollars they earn. So the first logical step is to raise or remove this cap.
There are different ways to do it; since Joe Biden pledged not to raise taxes on anyone making less than $400,000 a year, he would insert a donut hole between $168,600 and $400,000; those making more would pay payroll taxes on their income above that. Or you could just eliminate the cap entirely.
The second piece is to increase payroll tax rates. You could do that in a variety of ways too, say by gradually raising them by a fraction of a point every year; most people would probably barely notice.
Democrats have a number of these proposals floating around Capitol Hill, some of which do one or both of these things, and some of which supplement them with taxes from elsewhere. For instance, here’s one from Sen. Sheldon Whitehouse and Rep. Brendan Boyle that combines eliminating the cap with a tax on investments; it would make the system solvent essentially forever. Here’s another from Sens. Bernie Sanders and Elizabeth Warren that would eliminate the cap, assess payroll taxes on investment income, and increase benefits; it would keep the fund solvent at least until 2100.
Point is, these aren’t intricate bills with text running to thousands of pages. You decide which inputs you want to tweak, do some arithmetic, and you’re done.
It’s only the politics that are hard
That’s not to say it’s easy, just that it’s simple. There would be lockstep resistance from Republicans to any of these proposals, because they don’t like tax increases, and they really don’t like tax increases targeting the wealthy. But we’ve raised taxes on the wealthy before, and we’ve raised these taxes before; in 1983, Ronald Reagan signed a bipartisan reform that increased payroll taxes and raised the retirement age. It was painful, but it happened.
This is a fight Democrats could take on: They can engage in some salutary class warfare, force Republicans to defend the rich, and save what may be the most popular federal government program there is. It’s definitely worth doing.
It should be noted that in its original design, Social Security excluded workers in categories of jobs mostly held by women and racial minorities — agricultural workers, domestic workers, teachers — as well as the self-employed and many other categories of workers. In the 1950s it was reformed to become more inclusive.
A brief digression: As part of their damage control, the Trump campaign said something so egregiously wrong that it demands refutation: "The only candidate who poses a threat to Social Security and Medicare is Joe Biden — whose mass invasion of millions of illegal aliens will, if Biden allows them to stay, cause Social Security and Medicare to collapse," said Karoline Leavitt, the campaign’s national press secretary.
Because the default mode of political reporting is “Let campaign flaks lie,” readers are not told that this assertion, despite its appealing “Immigrants bad!” framing, is not just wrong, it’s the opposite of truth. In fact, undocumented immigrants shore up Social Security and Medicare. That’s because when many of them get jobs, they just make up a Social Security number, and their employer begins withholding payroll taxes. So they’re paying into the system, but since they’re undocumented, they won’t ever be able to collect benefits on the back end. A decade ago, the Social Security Administration estimated that undocumented immigrants were contributing $12 billion a year to the payroll tax system. That’s a lot of money!
And let's remember, the GOP doesn't really want to "fix" social security. The party's donors see all that money just. sitting. there. and desperately need a way to get their hands on it.
How about not raising taxes at all and just change the law from a pay-as-you-go program to one that allows federal revenue to supplement the program just like Medicare part B. It just requires a change in the law, no additional taxes.