By Alan M. Schlein
Senior Wire 

Social Security: Policy, politics, fact and fiction

Washington Watch

 

October 1, 2020



The misleading ads and distorted facts have not quite hit the level of the 2011 classic “granny off the cliff” political ad where an elderly woman was being foisted from her wheelchair over the edge of a cliff, which then-House Speaker Paul Ryan himself credited for sinking his budget proposal targeting Medicare. But the increasing confusion of information over the future of Social Security (SS) and Medicare has reached fever pitch in the current political environment. Both candidates for president are playing games with the facts.

Democratic presidential candidate Joe Biden accuses President Donald Trump of wanting to wipe out Social Security funds. Under Trump’s “planned cuts” to Social Security, a Biden ad says, “Social Security would become permanently depleted by the middle of calendar year 2023.

If Trump gets his way,” the ad continues, “Social Security benefits will run out in just three years from now. Don’t let it happen.”

That’s just not correct. The Washington Post’s fact-checker gives the ad its worst rating – four pinocchios.

Context matters here, and Trump’s positions and statements are also misleading on many aspects of this issue. Trump’s track record of protecting Social Security for seniors isn’t exactly encouraging. He often says one thing in direct conflict with his actions.


Remember, President Trump, who once vowed he would never cut entitlements, is the same president whose Justice Department continues to push in court to eliminate the Affordable Care Act entirely. That includes its provisions protecting pre-existing conditions for 130 million people, another thing Trump campaigns on, saying he doesn’t plan to eliminate.

In the upcoming November election, the voters’ top priorities remain how the Trump administration has handled or mishandled the COVID-19 pandemic, and that nearly 200,000 Americans are dead from the virus in mid-September. The death toll is projected to be 255,000 by election day.

The White House recently has intentionally shifted its rhetoric away from testing and toward talk of a vaccine – in Trump’s words “sometime in the month of October” or “maybe even before November 1.”

But voters need to ask some realistic questions: If a vaccine comes, when will people actually be able to get it? How effective will it be? And will it be safe? With every person likely needing two vaccine shots, how long will it really take to get it to 340 million Americans? Top scientists continue to suggest that if a vaccine is developed and safely maneuvered through government protocols, it will be the spring of 2021 at the earliest before people could get it. That puts turning around the economy and getting things back to any semblance of what used to be normal well into the middle of next year – at the earliest.


Social Security: The facts

While most people will decide their votes over the novel coronavirus issue and the future of the economy, many seniors derive most of their income from their Social Security payments, earned over decades of work. So while the issue is a back burner for some, it’s a top priority for SS recipients because they count on it to survive. Just look at the numbers.

Over 64 million people, or more than one in every six U.S. residents, collected Social Security benefits in June, 2020. In addition to retirement benefits, workers earn life insurance and disability insurance protection by making Social Security payroll tax contributions.

Some 97 percent of those over the age of 60 receive Social Security. But the numbers are much more modest than many people realize. The average Social Security retirement benefit was $1,514 a month, or about $18,170 a year.

For someone who worked all their adult life at average earnings and retires at age 65 in 2020, Social Security benefits replace about 40 percent of past earnings. That means that about four in 10 Americans over age 65 would have incomes below the poverty line. For one in four seniors, Social Security provides 90 percent of their income, and for about half of all seniors, it provides about 50 percent of their income. These benefits lift more than 15 million recipients out of poverty, the Center on Budget and Policy Priorities estimates.


And people love their Social Security –- as the Granny off the cliff ad reminds people. A 2019 Pew Research poll found that 74 percent of Americans favored “no reductions should be made” for current retirees’ benefits.

Both Medicare and Social Security are funded by revenue collected from payroll taxes taken out of people’s paychecks. So when collection of the revenue from those two programs is suspended, it endangers the viability of those programs, unless the money is somehow replaced. Since it was founded, Social Security’s funding source has always been a dedicated 12.4 percent payroll tax assessed on income up to an annual ceiling.

Half of this tax, or 6. 2 percent, is paid directly by employees, generally with money withheld from their paychecks. Employers pay the other half – along with another 1.45% for Medicare, again matched by the employer. Those who are self-employed must cover the entire amount.

Money collected from that payroll tax goes into the Social Security’s trust fund, where it is invested in special issue Treasury bonds. All funds paid into Social Security are accounted for in the program’s own budget, which is separate from the broader federal budget, known as general funds, and the Social Security money can only be used to pay promised benefits.

Trump refocused attention on the payroll-Social Security issue recently when he signed an executive order that would suspend the payment of payroll taxes until the end of this year. But he made a series of confusing remarks when he signed that order, further complicating the discussion.

His changes, which went into effect Sept. 1, halt the collection of the 6.2 percent payroll tax imposed on wages for Social Security. But taxpayers will still have to pay taxes on that later. His executive order asks the Treasury Secretary to eliminate that deferring of taxes through legislation. But only Congress can terminate the payroll tax. Realistically, no tax bill will be considered until next year, especially with the House controlled by Democrats and the difficulty of rallying Senate Republicans behind such a proposal.

When the Obama administration tried its payroll tax holiday during the 2007 Great Recession, it specifically included saying SS would be made whole with transfers from regular tax revenue (known as from general funds). Trump’s executive order does not say that, even though most people assume that. Complicating things more, when Trump was asked about this, he claimed that strong economic growth would cover the loss of the payroll taxes.

Here’s a reality check: Without general funds, the payroll tax raised $1.24 trillion last year, according to the Congressional Budget Office, so a 10-year period without general revenues (which Congress would never permit), would blow a $16.1 trillion hole in the U. S. budget. The current general fund already has trillions of dollars in debts, so Trump’s belief that economic growth will recoup those losses is just not realistic.

The bigger issue, however, is that Trump’s executive order, like many of his White House proclamations, does not have the force of law. Businesses from retailers to restaurants could refuse to implement it. Expected potential legal challenges to the president are also likely. As a result, many employers are just steering clear of the whole thing with some collecting the money and others not. Trump’s executive order does have the force of law in one place – with the 1.3 million federal government employees.

Despite his rhetoric, Trump has previously proposed major cuts in Social Security and Medicare. In his 2020 and 2021 budget proposals, he suggested deep cuts, for a total of $2 trillion over 10 years, according to the Wall Street Journal. While those budget plans have not gone anywhere in Congress, which controls the money, speaking in Davos, Switzerland, at a world economic forum last January, Trump said he was open to cutting entitlements (like Social Security, Medicare and Medicaid). “That’s actually the easiest of all things,” he said during a Fox Town Hall meeting in March. Trump never did specify which programs, and that gave him a chance later to tweet that he would not cut Medicare or Social Security.


Biden’s record

To further muddy the waters, Republicans are delighted to point back to Biden’s record over 40 years in the U.S. Senate. As a White House spokeswoman said, defending Trump’s record, “America’s seniors can rest assured that President Trump will always protect Social Security, unlike Joe Biden who bragged in the 1990s about his efforts to ‘freeze’ benefits.”

In 1982, Social Security was on the verge of bankruptcy. A National

Commission on Social Security Reform made recommendations and Biden helped push those reforms through the Senate, which resulted in putting Social Security on solid financial footing long term.

Among the changes made then were raising the retirement age from 65 to 67 and approving the bipartisan commission’s recommendation to increasing payroll taxes to improve the solvency of the program.

With federal budget deficits soaring under then President Ronald Reagan, Biden, Sen. Max Baucus, D-Mont., and two Republican senators proposed a simple solution – a one-year freeze on all spending, including defense spending and social programs such as Social Security, to keep deficits from undermining the economy recovery under way at the time. That plan lost 33-65, but in fairness to Biden, it was not aimed at Social Security specifically and was simply part of a larger budget deficit package.

Again in 1995, in another balanced budget fight, when Republicans had taken control of both the House and Senate, Biden once again pitched the idea of a total across-the-board spending freeze. For many years, seniors’ groups and liberal-leaning groups criticized Biden for supporting a balanced budget proposal. But in fact, Biden tried to pass an amendment at that time to the balanced budget plan that exempted Social Security, but the plan did not get the necessary votes.

Those issues continued in the late 1990s and in the early 2000s, and when budget deficits became major problems in Washington, Biden – like many mainstream politicians – thought action needed to be taken. In some cases, Biden offered proposals intended to counter more extreme options offered by Republicans. At other times, he indicated a willingness to bargain with Republicans, though any deal resulting in spending reductions, never happened. Biden also has taken more than 50 votes over his long Senate career to increase Social Security benefits and block GOP plans.

These days, it seems neither Republicans nor Democrats seem to be caring much about budget deficits. Biden’s campaign platform calls for raising Social Security payroll taxes on wealthier Americans and boosting benefits for people who have been receiving Social Security payments for at least 20 years.

It’s no granny off the cliff situation, but be clear: seniors vote and they could make a huge difference in deciding the winner of November’s election.

Also contributing: WPOST; CNN; Motley Fool; CNBC.

 
 

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