Donald Trump and J.D. Vance Say No Cuts for Social Security. That’s Impossible.
January 23, 2023 | Tags: Congress, entitlements, Government spending, REASON, Senate, Social Security, taxes
As Congress prepares for a fiscal policy fight over raising the federal government's debt ceiling, former President Donald Trump and one of the rising stars of the national conservative movement have issued a sharp demand: Don't touch Social Security.
"Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security," Trump said in a video message released by his presidential campaign Friday night. Shortly afterward, Sen. J.D. Vance (R–Ohio) posted his agreement, tweeting that "Trump is 100 percent correct."
Refusing even to consider changes to Social Security might be a tidy way to pander to older Americans, but it's not a functional plan for entitlements. In fact, it's actually an impossible situation.
If Congress refuses to do anything to alter Social Security's trajectory, benefit cuts will automatically kick in when the program hits insolvency. That point will be reached in 2035, according to the most recent Social Security Administration trustee's report. If that happens, the trustees estimate that Social Security will be able to pay only 80 percent of promised benefits.
Promising to do nothing, then, amounts to promising a 20 percent benefit cut in a little more than a decade. There is no getting around that fact.
That's a classic political strategy: Kick the can and deal with the consequences later. Even so, Trump, Vance, and others who advocate this approach should be confronted with the reality of what they are saying: full benefits for anyone getting Social Security now, but guaranteed cuts for anyone who expects to collect Social Security after 2035.
If you want to avoid cutting a single penny from Social Security but also dodge the benefit cuts coming in the middle of the next decade, the only available option is to raise taxes. Big time.
The combined shortfall for Social Security and Medicare—the federal old-age health insurance program, parts of which are headed for insolvency before the end of this decade—will amount to 6 percent of gross domestic product (GDP) by the mid-2040s, according to Brian Riedl, a senior fellow at the Manhattan Institute and former Senate budget staffer. That translates to about $1.4 trillion in today's dollars, though the actual amount will change (and likely grow) depending on GDP and the future value of the dollar.
Keeping those two programs solvent, without cuts, would therefore require a tax increase of well over $1 trillion. If Congress passed a 9 percent payroll tax hike, that wouldn't be enough—it would also need to create something like a 20 percent value-added tax (VAT), which would function like a federal sales tax, to cover the rest of the shortfall.
In a nutshell, those are the two options for policymakers who refuse to cut "a single penny from Medicare or Social Security." Inaction will postpone benefit cuts for another decade, and avoiding those benefit cuts would require tax hikes that might be politically impossible. It's a tricky situation, but ignoring its complexity only makes the problem harder, because the countdown to insolvency will continue.
Realistically, the only serious approach will require some changes to existing Social Security benefits. That could mean reducing benefits for wealthier retirees or implementing across-the-board benefit reductions that would be phased in over time, allowing younger workers to offset smaller Social Security benefits with private savings. Ideally, workers would be able to opt out of Social Security altogether, so they can save and invest for their own retirement without having to pay payroll taxes.
But none of those options can begin to be considered if a critical mass of Republicans adopts the short-sighted view advocated by Trump and Vance.
That's particularly galling in Vance's case, given his previous support for a more thoughtful and workable approach to Social Security's fiscal issues. On his personal blog (where he went by the name "JD Hamel"), Vance wrote approvingly in 2011 of plans put forth by then-Rep. Paul Ryan (R–Wisc.) to balance the budget and reform entitlements. In a 2010 post, he correctly pointed out that the "political obstacles" to entitlement reform "intimidate more than the practical problems."
"The Republican Party," he wrote, "is also the party of the aging white person. The party's only solid constituency thus depends on the Medicare and Social Security Benefits that are the biggest roadblocks to any kind of real fiscal sanity."
More than a decade later, Vance is now living that reality. A decade from now, the country will be dealing with the consequences of his newfound shortsightedness.
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