The dark reality of Donald Trump and Joe Biden's Social Security proposals

Cuts to Social Security benefits are on the table no matter who wins in November.

For 23 years, the national pollster Gallup has surveyed retirees to assess their reliance on America’s main retirement program, Social Security. During that time, up to 90% of respondents—and 88% in 2024—have said their Social Security checks are a “major” or “minor” source of income. In other words, very few retirees would be able to make ends meet without Social Security.

It is Gallup's finding that makes the following statement so troubling: Social Security is in trouble.

While this flagship program is not in danger of going bankrupt or becoming insolvent, the prospect of significant cuts to welfare benefits in the not-too-distant future is very real. The American public is counting on its elected officials to fix the program’s problems—and that starts in the Oval Office with Donald Trump or Joe Biden, depending on what happens on Election Day.

Former President Donald Trump speaking to reporters. Image source: Official White House Photo by Shealah Craighead.

Sweeping benefit cuts of up to 21% could await beneficiaries of retired workers

The future of Social Security has been in limbo for four decades. Since 1985, the annual report of the Social Security Board of Trustees has warned that long-term revenues (i.e., the 75 years following the publication of a report) will not be sufficient to cover expenditures. The size of this deficit has grown over time.

By 2024, the board estimated that Social Security faces a long-term funding gap of $23.2 trillion.

Furthermore, the Old Age and Survivors Insurance Trust Fund (AVS), which distributes benefits each month to 51 million retirees and around 5.8 million survivors, is expected to exhaust its asset reserves by 2033. If AVS asset reserves are exhausted, radical benefit cuts of up to 21% may be necessary to avoid further reductions until 2098.

Despite the myths and misconceptions circulating online that blame Congress and undocumented workers on traditional welfare benefits for these thefts, the financial maelstrom facing Social Security is entirely tied to ongoing demographic changes. In no particular order, the main culprits are:

Strengthening social security for current and future generations starts at the top. Unfortunately, the proposals put forward by presidential candidates Donald Trump and Joe Biden fall short.

Sweeping benefit cuts may be necessary if AHV asset reserves are depleted. U.S. Old-Age and Survivors Insurance Trust Fund assets at year-end, data by YCharts.

Donald Trump's hands-off approach ends a serious problem

To be fair, it's difficult to judge Donald Trump's “plan” for Social Security when neither he nor his campaign team have officially proposed one. Although the former president previously believed that reducing welfare costs was something that should be on the table, he repeatedly pledged to leave Social Security alone in several speeches ahead of the 2024 elections.

While a hands-off approach will not cost Donald Trump voters much, doing nothing is not a viable solution to Social Security’s weakening financial foundation. As we have noted, the estimated long-term funding gap is growing rapidly, and fiscal policy tax cuts are not going to fix it.

Even if Donald Trump considered “fixing” Social Security by reducing various entitlements, such as gradually increasing the full retirement age, the former president's goal of strengthening the program would be doomed. failure.

Efforts to reduce spending would span several decades. In other words, gradually raising the full retirement age would not solve the problem of the AVS reserve deficit, which is expected to occur in nine years. If Republican lawmakers often look to the horizon, they miss the more immediate problem that could lead to benefit cuts starting in 2033.

President Joe Biden delivers a speech. Image source: Official White House photo by Hannah Foslien.

Joe Biden's plan to tax the rich ignores long-term demographic changes

At the other end of the spectrum, Joe Biden wants to raise revenue by taxing the wealthy and redistributing some of that extra income to low-income people and elderly beneficiaries.

While you can read Biden's four-point Social Security plan in more detail, the gist of his proposal includes:

Restore the 12.4% payroll tax on earned income over $400,000 (the maximum taxable income limit in 2024 is $168,600). Change the cost-of-living adjustment (COLA) measure from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Consumer Price Index for Seniors (CPI-E). Increase the special minimum benefit to 125% of the federal poverty line. Provide for a phased increase in the amount of primary insurance for senior beneficiaries (starting at age 78 and ending at age 82).

While Biden’s Social Security proposal immediately increases revenue, points two, three, and four above would offset a significant portion of the gains from it. According to an analysis by the Washington-based think tank Urban Institute, Biden’s proposal extends the solvency of Social Security trust funds for only five years.

Neither Trump nor Biden have a plan to solve Social Security's growing cash deficit

The grim reality for current and future retirees is that neither Donald Trump nor Joe Biden has a proposal that will fully address Social Security's long-term funding gap. Although Biden's plan would extend the depletion date for AVS asset reserves by a few years, neither proposal removes the benefit cut.

To add to the above, Trump and Biden do not have the votes needed to pass their respective bill(s). While a simple majority is the deciding factor in the House of Representatives, the Social Security amendment will require 60 votes in the US Senate. The last time either party won a 60-seat supermajority in the upper chamber of Congress was in 1979.

Bipartisan cooperation will be a must for Social Security reforms to become law. However, Democrats and Republicans could not be further apart in their respective approaches to strengthening America’s main retirement program. Republicans in Congress will not support any plan targeting high earners, while Democrats on Capitol Hill are staunchly opposed to any proposal that cuts benefits (for example, by raising the full retirement age).

If there's a silver lining for seniors, it's that lawmakers have a history of coming together at the last minute to find a middle ground for Social Security. We saw this happen in 1983, when the program's asset reserves were effectively running on steam.

The Social Security Amendments of 1983 combined bipartisan proposals, including a phased increase in payroll taxes, the introduction of a tax on benefits, and a gradual increase in the full retirement age over four decades. Cooperation on Capitol Hill is possible, but it tends to occur on a reactive, not proactive, basis.

For now, welfare cuts remain on the table, regardless of who wins in November.

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