Herb Rothschild Jr.: The continuing partisan struggle over Social Security
CNN exit polling, the only data I found about how seniors voted in this election, reported that 52% of those 65 and older chose Trump, 47% Biden. That category wasn’t disaggregated by race, so perhaps 60% of white seniors voted for Trump. The choice was disappointing given that he repeatedly dismissed us (“us” because I’m 81) as expendable casualties of COVID-19 and that he pledged to permanently cut FICA, the payroll tax that funds Social Security.
Oddly, that second assault on our well-being didn’t become a campaign issue. Trump announced his intention on Aug. 9, saying that he would pay for Social Security out of the general fund, which (of course) would grow at unprecedented rates during his second term. That (of course) wouldn’t happen. The Social Security Trust Fund would go bankrupt in three years.
The day before, Trump had issued an executive order deferring for four months beginning Sept. 1 the employee portion of FICA (6.2% of gross wages) for individuals making less than $4,000 bi-weekly. The order provides some relief for lower-wage workers during the pandemic, but it won’t impair the health of the trust fund. Workers will have to repay the money next year.
I don’t know Trump’s motive for pledging to end the tax permanently. It probably was a late effort to win working-class votes with a promise he knew Congress wouldn’t let him keep. George W. Bush had wanted to “reform” Social Security by diverting some of the payroll tax to private investment accounts. He announced that reform as a priority at the start of his second term. By June, public opposition to the plan had grown from 48% to 65%. By October, he and his allies in Congress dropped it.
Bush’s motive was transparent. Wall Street has longed to get its hands on the last big pot of money still beyond its reach. Is that the motive of Mitt Romney, who made his money in finance? During his 2012 campaign, he proposed a version of Bush’s “reform.” This year, he introduced the Time to Rescue United States’ Trusts (TRUST) Act of 2020, which would establish “rescue committees” for federal trust funds, including Social Security. In that connection, he told CNBC, “If you ever want to see a balanced budget, if you ever want to get out of debt, you have to deal with these trust funds.”
Theoretically, the three major trust funds are self-funding and thus have no impact on the annual budget or the debt. But the Highway Trust Fund has been running deficits because gas tax collections have fallen, and the Medicare Part A (hospitalization) Fund may be exhausted in two to three years thanks to lower tax revenues and higher hospitalizations during the pandemic. Social Security, however, still runs surpluses, thus disguising the true size of the annual deficit and funding the single largest share of the national debt.
Because of our aging population, Social Security will need adjustment before 2032 or shortly thereafter. The fairest adjustment is to remove the $132,900 cap on annual taxable earnings and end the exemption for the kinds of income that largely benefit the wealthy, e.g. dividends, capital gains and rental, bond and private equity income. HR 860, the Social Security 2100 Act, and S 269, its companion, would raise the cap and improve the benefits. These are the Democrats’ proposals. We’ll see if the partisan struggle over the future of Social Security gains a higher profile next year, and whether white seniors will understand more clearly which party has our well-being at heart.
Herb Rothschild’s column appears in the Ashland Tidings every Saturday.