How to fix the projected shortfall in Social Security’s finances has been a hotly debated topic in recent presidential campaigns. Not so for the 2016 general election, yet.
Neither candidate has offered a detailed plan to fix the funding problems for Social Security, which in June was predicted by the program’s actuaries to see its trust fund run dry in 2035. After that date, it would pay out reduced benefits promised to seniors. The disability portion of the federal program, funded through payroll taxes, would run out of money within a decade, in 2023, and also begin paying a reduced benefit.
Social Security hadn’t much been in the political mix until Tuesday night, when the moderator of the vice presidential debate, Elaine Quijano of CBS news, asked about the dates when Social Security is projected to be unable to meet its obligations to seniors.
“We have to keep it solvent. And we will keep it solvent,” Sen. Tim Kaine, D-Va., said in response. “And we’ll look for strategies like adjusting the payroll cap upward in order to do that.”
The bedrock program for older Americans finally entered the campaign debate.
Social Security is a significant issue in states with high populations of retirees, especially places such as Florida or the Carolinas. Under the program, active workers fund the benefits for current retirees.
Candidates this year have largely stuck to what they won’t do. Donald Trump has said he won’t cut benefits or raise the retirement age. Hillary Clinton’s website notes that she won’t raise the retirement age or change the formula for how cost-of-living adjustments are calculated to save money on the backs of retirees.
But Kaine gave a specific answer on what a Clinton administration would do to solve the shortfall. They’d lift the cap on how much of a worker’s income is subject to the payroll taxes that fund Social Security. Right now, 6.2 percent of a worker’s wages are subject to that contribution, capped at the first $118,500 of income. Employers match an equal 6.2 percent of that worker’s payroll tax toward Social Security. The self-employed have to pay in 12.4 percent.
There are several proposals floating around Congress, including one to simply make all income subject to the payroll tax, which would effectively finance the program by raising taxes on the rich. That would represent a sea change to the program’s philosophy that workers get back a benefit roughly in proportion to their lifetime contributions.
Vanquished Democratic presidential candidate Sen. Bernie Sanders, a Vermont independent, proposed removing the $118,500 cap for people earning more than $250,000.
Among the less drastic options are leaving in place the amount of income subject to the payroll tax but increasing the rate from the 12.4 percent paid by employers and workers together to something near 15 percent. Or Congress could just mandate a lower benefit, something akin to political suicide, since older voters are active ones.
Trump’s running mate, Mike Pence, the Republican governor of Indiana, offered a contradiction:
“All Donald Trump … and I have said about Social Security is we’re going to meet our obligations to our seniors. That’s it,” Pence said, seeming to almost immediately contradict that by adding that he and Trump sought to “reform government programs so we can meet the obligations of Social Security and Medicare.”
It wasn’t clear whether Pence meant they’d overhaul those entitlement programs or other federal programs.
As a congressman before retiring to run for governor, Pence was a strong supporter of a controversial plan proposed by President George W. Bush that would have diverted a portion of the money going into Social Security into private investment accounts. The idea behind the so-called private accounts is that the money could grow for retirees at a rate faster than the accrued benefits promised under the government program.
“It still remains a threat, and as long as you have people in position of power and influence … you still have that threat of privatization,” said Pamela Causey, spokesperson for the National Committee to Preserve Social Security & Medicare, a left-leaning advocacy group for seniors.
Candidate Trump promises the status quo on Social Security, but he has championed the concept of private accounts.
“The solution to the Great Social Security crisis couldn’t be more obvious: Allow every American to dedicate some portion of their payroll taxes to a personal Social Security account that they could own and invest in stocks and bonds,” Trump wrote in 2000 in his book.
That Social Security emerged in Tuesday’s debate might mean the candidates will be asked more questions about it before Election Day.
“Neither has a plan to save Social Security or stem the growth of our debt. That makes the last two presidential debates all the more important,” Maya MacGuineas, the head of the watchdog group Committee for a Responsible Federal Budget, said in a statement Wednesday.