Trump’s latest plan to undermine Social Security
Donald Trump recently floated cutting the Social Security contribution rate. Voters should not be fooled by this Trojan horse. It looks like a gift to working Americans. In reality, it is part of a longstanding effort to end Social Security.
The proposed cut is supposedly about stimulating the economy. But there are many better ways to achieve that goal. Indeed, cutting the Social Security contribution rate is a particularly poor way. The largest breaks would go to those with higher incomes — who are more likely to simply save the cut and less likely to spend it. Moreover, about one-fourth of those who work for state and local governments don’t participate in Social Security. Therefore, they would get nothing.
If Trump truly wanted to stimulate the economy through tax breaks, there are much more targeted, efficient ways to do that. He could reinstate the Making Work Pay Tax Credit, which President Obama and the Democrats in Congress employed in 2009 and 2010. Unlike cutting the Social Security contribution rate, that tax cut was targeted to those who were least likely to simply save it and most likely to spend it in their local economies immediately.
Despite the obvious advantages that the Making Work Pay Tax Credit provided, Republicans insisted that it be allowed to expire, and be replaced with a two percent cut in the Social Security contribution rate. Despite the disadvantages, the Social Security cut had one big advantage: It furthered a longstanding goal of conservatives – undermining Social Security.
Conservatives have opposed Social Security since the moment it was introduced in 1935. Labeling Social Security “socialism,” they argued against it straightforwardly, on ideological grounds, in the 1930’s, 1940’s, 1950’s, and 1960’s. Every time they were defeated. Supporters of Social Security foiled their attacks and, indeed, succeeded in expanding Social Security.
So, Social Security’s opponents changed their tactics. During the last few decades, no politicians have argued that they oppose Social Security. Even as President George W. Bush sought to privatize it, he described it as “one of the great moral successes of the 20th century.” He and other Republicans assert that they simply want to “save” it.
Even with the changed tactics of expressing their support and desire to “save” Social Security, though, they have been unable to scale it back, and certainly not dismantle it. That is because the American people overwhelmingly support Social Security. They recognize and appreciate that it provides working families with basic economic security when wages are lost as the result of death, disability or old age. And it does so extremely efficiently, securely, fairly and universally.
Republicans have suffered defeat on their frontal attacks against Social Security’s modest but vital benefits. Trump appears to be contemplating a stealth attack.
In the 1980s, Republicans, who had long tried but failed to cut government programs directly, discovered a new tactic. They realized that they could undermine government and eventually force cuts to spending by cutting taxes and, in their words, “starving the beast.” Now, Trump appears to be making plans to use that same tactic against Social Security.
If the proposed reduction in Social Security’s dedicated revenue were not replaced with other revenue, it would drastically increase Social Security’s projected shortfall. This is a sharp contrast with Democratic plans to expand Social Security and increase its dedicated revenue. Indeed, the Social Security 2100 Act, which was authored by Rep. John Larson (D-Conn.), has 210 co-sponsors and will be voted on this fall, does just that. A Trump rate cut, with no revenue replaced, would make expanding and not cutting Social Security harder to achieve.
At the same time, if the proposed reduction were replaced by general revenue, that would threaten the program’s fundamental structure that has made it so overwhelmingly popular over its 84-year history. Social Security is wage insurance that the American people earn as part of their compensation and fund with deductions from their pay. It is not a government handout.
It is instructive to note that Social Security contributions are mandated by the Federal Insurance Contributions Act (“FICA”). It is useful to pause and reflect on the name, the Federal Insurance Contributions Act.
It is common today to refer to Social Security insurance contributions as payroll taxes, but that is misleading. Referring to Social Security premiums as taxes blurs the distinction between them and other taxes. Obviously, if government mandates payments, that can be called a tax. But, as its name indicates, FICA payments are insurance contributions — premiums — that workers pay for their insurance protection when wages are lost in the event of old age, disability, or death.
Because they are premiums, not mere taxes, those funds are held in trust and can be used only for Social Security.
Because no benefits can be paid unless their cost is covered by Social Security’s dedicated revenue and because Social Security has no ability to borrow money, it does not and cannot add to the deficit. If Social Security’s dedicated revenue were replaced with general revenue, as Trump may be considering, that would no longer be true. Instead, Social Security would add to the deficit and would be forced to compete for dollars with military spending, farm subsidies, and every other good and service financed by the federal government. This would unquestionably weaken the ability of Americans to count on their earned benefits.
The Trump proposal to cut these premiums is likely to deepen the understandable but mistaken belief held by much of the public that Congress is stealing their Social Security contributions. Past congresses have worked hard to maintain a wall between the government’s general fund and Social Security’s dedicated funds, which, by law, must be held in trust and used only for Social Security.
Even discussion of the proposal reinforces the public perception that elected leaders are cavalier with the Social Security contributions they are supposed to be overseeing. Reducing those contributions for non-Social Security purposes — including stimulating the economy — certainly violates the spirit of what it means to be a fiduciary of funds held in trust for others.
If Trump truly wanted to help the economy and the middle class, he would be seeking to expand Social Security, while requiring the wealthiest among us to pay their fair share. But he clearly wants to undermine, not strengthen, Social Security.
No one should be fooled by Trump’s campaign promise not to cut Social Security. Before he became a candidate, he called it a Ponzi scheme, said that “privatization would be good for all of us,” and, in true elitist fashion, called for raising the retirement age to age 70, because “how many times will you really want to take that trailer to the Grand Canyon?”
But he understands how popular the program is. In a 2011 interview with Sean Hannity, Trump said that Republicans should be very careful “not to fall into the Democratic trap” of advocating Social Security cuts without bipartisan cover, or they would pay the price politically. Once he won the nomination, though, he selected Mike Pence as his running mate. Pence so ardently supports Social Security cuts that he complained that the Bush privatization proposal didn’t go far enough, fast enough.
As president, Trump’s budgets have included cuts to Social Security. This is no surprise, given that Trump chose a staunch opponent of Social Security, Mick Mulvaney, as his budget director and chief of staff.
This latest proposal is in keeping with Trump’s actions and his earlier, more honest statements of his views. Americans should hold Trump accountable for his promises not to cut Social Security. But they should also remember his real views, and be on guard for this, and other, Trojan horses that would promise working Americans “gifts” while fundamentally destroying the economic protections they have earned and deserve.
Nancy Altman is president of Social Security Works.