There is no doubt that this has been a chaotic year like no other before. The 2019 coronavirus disease pandemic (COVID-19) has killed nearly 135,000 Americans, as of this past weekend, and displaced more than 20 million workers during nonessential business closings in most states.
But in the midst of this chaos, we cannot lose sight of the fact that it is also an electoral year. Every seat in the United States House of Representatives and a third of the seats in the Senate are available for voting in the November elections. But it is the race for the Oval Office between Republican Party chief Donald Trump and Democratic Party challenger Joe Biden that is drawing much of the attention.
President Trump speaking to an audience. Image source: Official White House photo by Joyce N. Boghosian.
The president will be tasked with fixing a broken Social Security program.
The winner of the November presidential elections will be tasked with addressing a number of key issues, including the ongoing COVID-19 response, reviving economic growth and immigration. But it is the nation’s most successful social program, Social Security, which possibly deserves a lot of attention.
Social Security has been a financial stone for seniors for the past eight decades and is responsible for lifting more than 15 million retirees out of poverty each year. However, the latest report from the Social Security Board of Trustees finds that the nation’s historic program faces a huge financing gap in the next 75 years.
How could this happen? Let’s say it’s not just because baby boomers retire in greater numbers. Rather, there are more than a half-dozen demographic changes at stake, including increased longevity, lower birth rates, less net legal immigration, and even greater income inequality, to name a few.
Due to these changes, it is estimated that the asset reserves of more than $ 2.9 trillion from Social Security (that is, its accumulated net cash surpluses since the beginning) will be completely depleted by 2035. If this excess capital disappears, benefits are reduced by up to 24% can be passed on to current and future retired workers to keep the program solvent.
If you’re curious about how bad things have gotten for Social Security, the Trustees’ latest report estimated a cash deficit of $ 16.8 billion (yes, with a “t”) between 2035 and 2094. If the challenger Joe Biden wins in November or if incumbent Donald Trump succeeds in pursuing a second term, the president will be reviewed to fix what appears to be a broken Social Security program.
Joe Biden listening to former President Barack Obama speak. Image source: Official White House photo by Pete Souza.
The views of both candidates on Social Security have changed considerably over time.
Interestingly, the views of both candidates on Social Security have evolved quite a bit in recent decades.
Donald Trump, for example, once supported the idea of partially privatizing Social Security. Privatization involves reserving a portion of payroll tax income in a separate account that a worker could invest as they see fit. In his book The America we deserveTrump suggested that offering workers the opportunity to invest a portion of their future retirement benefits would be a creator of value for the stock market and an opportunity for growth in the American economy. Since then, Trump has distanced himself from the idea of privatization.
Trump also asked for a one-time wealth tax on people with a net worth of more than $ 10 million in The America we deserve, with half of the income from this tax to be used to strengthen the reserves of Social Security assets. It’s fair to say that Trump doesn’t support that tax on the wealthy today.
Then there is Joe Biden. On a couple of occasions over the past two decades, he has hinted that he would agree to the idea of cutting Social Security benefits as part of a broader package to strengthen the program. Reducing benefits in any way runs counter to central Democratic ideology when it comes to Social Security. Lately, Biden has taken on a tone that conveys a desire to expand Social Security benefits for current and future retirees.
Image source: Getty Images.
A sad truth from Social Security
On the surface, it appears that whoever wins the November elections has a plan to strengthen the Social Security program. But there is only one problem. The sad truth is that, except for a supermajority in the Senate (that is, 60 seats belonging to the same party), nothing will likely be done on the Social Security front no matter who wins.
You may wonder why it is so difficult to reform the Social Security program when there are countless proposals to do so on Capitol Hill. The first problem you will encounter is political arrogance. This means that both parties have a central solution to strengthen Social Security, and both solutions work. Ergo, neither party considers it necessary to back down their position and work with their opposition to find common ground. This leads to a standstill in the Senate, where 60 votes are required to amend the Social Security Law.
Another problem is that there is no way to strengthen the Social Security program without some group of people ending up worse. For example, if Democrats got away with raising taxes on the well-off, then high-income Americans would have to pay more to the program without a proportional increase in their retirement benefit.
Comparatively, if Republicans gradually raised the full retirement age, future generations of workers, like millennials, would receive fewer lifetime Social Security benefits. Because each solution involves some group of people who end up worse than they were before, this could lead to the majority party being ousted during the subsequent elections. Therefore, lawmakers are shy to seriously tackle Social Security reform.
There is little doubt that something needs to be done about Social Security, as we are 15 years away from the need for major benefit cuts. But the reality of the matter is that the November winner, be it Biden or Trump, has an almost impossible task of unifying lawmakers in Washington to pass Social Security reform.
I’m afraid the can will be kicked down the road for another four years, no matter what happens in November.
