Biden and Trump Pledge to Do Nothing
Please consider the Biden-Trump Plan to Cut Social Security
- Joe Biden: “I guarantee you I will protect Social Security and Medicare without any change. Guaranteed,” the president said in March.
- Donald Trump: “I will do everything within my power not to touch Social Security, to leave it the way it is.” A pro-Trump super PAC launched an ad attacking Florida Gov. Ron DeSantis for his efforts as a member of Congress to restructure benefits.
While Trump promised to not touch SS, Biden said he would protect SS “without any change“.
Biden’s “guarantee” is impossible, by existing law.
The pledge to not change a thing means automatic benefit cuts starting in 2033 according to the bipartisan Congressional Budget Office (CBO).
CBO’s 2022 Long-Term Projections for Social Security
Inquiring minds may wish to consider the CBO’s 2022 Long-Term Projections for Social Security
Social Security’s Finances, With Payable Benefits. CBO projects that if Social Security outlays were limited to what is payable from annual revenues after the trust funds’ exhaustion in 2033.
The Social Security Funding Problem
The Heritage Organization discusses Benefit Cuts of 23%—and 4 Other Things to Know About the Government’s New Social Security Projections
- Social Security has a spending problem. Social Security started out as a 2% tax, and the program promised to never take more than 6% of workers’ paychecks. Today, it takes 12.4%, and even that falls far short of the program’s ever-rising costs. The CBO projects that Social Security’s costs will increase by 42% over the next 75 years as its revenues remain stable. Protecting Social Security requires reining in its excessive cost growth.
- Inaction means benefit cuts of 23% beginning in 2033. Current law requires that Social Security benefits come from within the program, so once the trust fund runs dry, Social Security will only be able to pay as much in benefits as it receives in taxes. That will mean a roughly $5,000 cut in annual benefits for a typical retiree and about $4,000 less for the average disability beneficiary. No one—not even 98-year-olds—will be exempt from these cuts.
- Anyone who is 56 years old or younger today won’t receive a full benefit. Anyone who is 56 or younger today will not reach Social Security’s normal retirement age of 67 before the program runs out of money. And anyone who is currently between the ages of 57 and 107 today who is still alive and collecting benefits in 2033 will also be subject to benefit cuts.
- Younger workers have the most to lose. If policymakers fail to act and benefit cuts begin in 2033, the CBO estimates that people born in the 1960s will experience a 19% reduction in their lifetime benefits, those born in the 1970s will experience a 26% reduction, and those born in the 1980s and 1990s will experience a 27% reduction. Research from The Heritage Foundation shows that Social Security is an especially raw deal for younger workers who have to put their money into a broken system instead of into savings accounts that would generate positive returns. The average worker could have three times as much retirement income if they had been able to own and invest their Social Security taxes—and even the lowest-income workers could have 40% more.
- Preventing insolvency through tax increases would require a 17.3% payroll tax. The CBO says that maintaining Social Security’s scheduled benefits for the next 75 years would require an immediate increase in Social Security’s payroll tax, from 12.4% to 17.3%. This would mean $12,250 in Social Security taxes for the median household that has about $71,000 of income. Adding in Medicare and federal and state income taxes would bring the median household’s marginal tax rate to about 48%.
Social Security Expansion Act: $33.8 Trillion Tax
Biden cannot up payroll taxes without breaking his pledge to not hike taxes on anyone making less than $400,000.
Nonetheless, Democrats concocted a $33.8 trillion tax scheme called the Social Security Expansion Act.
New or Increased Benefits
- A Large and Permanent Benefit Increase for all Social Security Recipients Beginning in 2024.
- Application of a Narrow Inflation Measure that Results in Larger Cost-of-Living Adjustments (COLAs).
- An Increase in the Special Minimum Benefit.
- Continuation of Children’s Benefits Through Age 22, Instead of the Current Age 18.
New Taxes
- Raising and Then Eliminating Social Security’s Payroll Tax Cap. Currently, Social Security’s 12.4 percent tax rate applies to the first $160,200 of workers earnings. The Social Security Expansion Act would add Social Security’s 12.4 percent tax to all earnings above $250,000 without any increase in benefits for the newly taxed earnings.
- A New 12.4 Percent Investment Surtax. The Expansion Act would add a 12.4 percent surtax to investment income of individuals making over $200,000 and married couples making over $250,000. In addition to the current 3.8 percent Obamacare surtax and the top 20 percent marginal tax rate, this would raise the top rate on long-term dividends and capital gains from 23.8 percent to 36.2 percent, and the top federal rate on interest income and short-term capital gains from 40.8 percent to 53.2 percent. Combined with state and local capital gains tax rates, the top rate would reach 68 percent.
- A New 16.2 Percent Tax on Small Business Owners. Currently, S-corporations, limited partnerships, and other businesses that file taxes as “pass-through entities” (which pay taxes at the individual level and not at the corporate level) are subject to these Social Security, Medicare, and Obamacare taxes only on the salaries and certain compensation paid to employees or owners (and only up to the current taxable max for Social Security), but not on owners’ share of the active business income, which carries more inherent risk. The Social Security Expansion Act would impose a new, 16.2 percent “net investment income” surtax on all such entrepreneurial profits of these business owners above $200,000 for individuals and $250,000 for married couples.
The bill is sponsored by Senators Bernie Sanders (I–VT) and Elizabeth Warren (D–MA), along with Representatives Jan Schakowsky (D–IL) and Val Hoyle (D–OR).
Social Security Expansion Act Is Only a Fraction of the Progressive Agenda
The Social Security Expansion Act’s $33.8 trillion in tax hikes over the next 75 years would only cover a small portion of progressives’ socialist agenda. Providing other things—like Medicare for all, free college, a universal basic income, and the “Green New Deal”—would cost roughly another $50 trillion to $90 trillion over just 10 years.
The Social Security Expansion Act is a big step toward Bernie Sanders’s mathematically impossible and economically inconceivable socialist agenda. As history repeatedly demonstrates, socialist governments depress economic output and consign everyone but the ruling elite to drastically lower standards of living.
How to Preserve Social Security’s Purpose and Strengthen Workers’ and Retirees’ Futures
Policymakers should preserve Social Security’s original intent by gradually shifting toward a universal benefit. That would mean slowly ratcheting up benefits for lower earners and reducing benefits for higher earners so that by the time workers just entering the labor force today retire, they will receive the same flat Social Security benefit (based on years of work instead of earnings) and it will keep more people out of poverty.
Combining a universal benefit with other commonsense changes like using a more accurate inflation index and increasing Social Security eligibility age and indexing it to life expectancy would make Social Security solvent for the long run and allow a roughly 20 percent reduction in Social Security’s tax rate to 10.1 percent.
Researchers with the Penn Wharton Budget Model analyzed a proposal similar to the Heritage Foundation’s that would do a better job of targeting Social Security benefits.
In addition to commonsense changes to preserve Social Security’s purpose and ensure its solvency, policymakers should incorporate a wealth-building option within Social Security. Workers should have the choice to put part of their Social Security taxes into an account that they own, that can generate large positive returns over time, and that can be passed on to their families. Research by Heritage Foundation analysts shows that if individuals were able to put their Social Security taxes into their own retirement accounts, workers at all income levels would have far more in retirement than Social Security will provide.
A middle-income man, for example, would have three times as much income in retirement from a personal account than from what Social Security will provide.
Under this option, anyone who wants to remain in the current Social Security system without a wealth-building account would be free to do so.
Instead of raising taxes like Biden wants to do but lies about it, or genuinely pledging to do nothing like Trump for political expediency, are there any adults in the room willing to have an honest look at badly needed reforms?
This post originated at MishTalk.Com
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Mish
Social Security was originally sold as a program to reduce senior poverty, and it’s been very successful in that. They can reduce the benefits at the upper level and still be successful in reducing senior poverty.