Donald Trump’s Social Security promise halts fix to shortfall

As a candidate, Donald Trump bucked conservative orthodoxy and many in the Republican leadership with a sweeping promise to defend Social Security, but his hands-off policy as president isn’t breaking the partisan standoff that likely dooms efforts to address the coming financial crisis in America’s most popular safety net program.

Mr. Trump’s vow not to touch Social Security — not that he wouldn’t touch the “third rail” of U.S. politics but that he wouldn’t endorse Republican plans to dramatically overhaul the retirement program — helped reassure blue-collar and other Democratic voters who crossed party lines in November to put him in the White House.

“I’m not going to cut Social Security like every other Republican, and I’m not going to cut Medicare or Medicaid,” he said during the campaign. “Every other Republican is going to cut, and even if they wouldn’t, they don’t know what to do because they don’t know where the money is. I do.”

But his arrival at the White House has not spurred any visible activity in Washington on a bipartisan plan to address Social Security’s financial shortcomings. The program hurtles toward a shortfall that, unless Congress acts, will result in an automatic benefit cut of about 21 percent for workers now in their 40s and 50s when they reach retirement age.

The Social Security board of trustees’ annual report last year projected that the rising costs of the Old Age, Survivors and Disability Insurance programs would deplete the trust funds by 2034, leaving only enough from dedicated payroll taxes and taxation of Social Security benefits to pay 79 percent of the promised benefits through 2090.

The shortfall is the result of an aging U.S. population, recipients living longer on average and the declining U.S. birthrate. With women giving birth on average to two children instead of three, the number of future workers to support retirees is reduced by a third by 2034.

Now Mr. Trump’s promises from the campaign trail are getting in the way of real solutions, analysts say.

“The president certainly has made it more difficult to pass fixes to Social Security given the dire straits it is in,” said Republican Party strategist Ford O’Connor. “The only way you are going to get fixes to Social Security is if Donald Trump leads the charge.”

There is no sign that Republicans and Democrats on Capitol Hill are talking compromise, despite a range of potential reforms that could avoid deep benefit cuts down the road.

The trustees report, for instance, calculated that an increase in the payroll tax by 2.58 percent to 14.98 percent, split evenly between workers and employers, would keep the program solvent for 75 years.

Workers and employers currently pay 6.2 percent in Social Security withholding tax and would pay 7.49 percent each under the 75-year plan. That would be in addition to the 1.45 percent payroll tax that employees and employers pay for Medicare.

Raising the withholding tax is a nonstarter for Republicans and advocates for working-class families, who say it would be devastating to Americans living paycheck to paycheck.

Sen. Bernard Sanders, the Vermont socialist who almost succeeded with a run for the 2016 Democratic presidential nomination, has proposed increasing benefits by imposing payroll taxes on incomes above $250,000. The current rules tax earnings up to $127,200.

Another option — a truly hands-off solution — would require Mr. Trump to succeed with his economic agenda and push growth to 3 percent or higher.

“He wants to protect, preserve and save Social Security. But you know what the best way to do it is: economic growth,” Republican pollster and strategist Jim McLaughlin said.

“The big problems we’ve had in all the entitlement programs right now, whether it’s Medicare, Social Security or even something like Medicaid, we’ve had no economic growth for more than a decade,” he said. “If you create economic growth, you can do things to shore up Social Security and Medicare.”

Indeed, the trustees projected that with economic growth near 2 percent a year and the unemployment rate at 4.5 percent, there would never be a shortfall. The annual economic growth rate in the U.S. has averaged less than 2 percent since 2001.

Republican plan

A month after Mr. Trump’s election, Rep. Sam Johnson, the Texas Republican who chairs the House Ways and Means subcommittee on Social Security, introduced a reform plan that included tax incentives to keep workers on the job into old age and a hike of the full retirement age — now pegged to rise to 67 by 2022 — to age 69 by 2030.

Mr. Trump’s critics slammed him for not speaking out against the proposal, dubbed the Social Security Reform Act.

Mr. Johnson said he remains committed to finding a fix.

“Washington cannot ignore the fact that Social Security has serious financial challenges, and the longer we wait to address these challenges, the harder it will be. I’m going to continue to make the case to permanently save Social Security so our children and grandchildren can count on the program in the future just as our seniors and individuals with disabilities do today,” he told The Washington Times.

Those on the left reject out of hand anything short of Mr. Trump’s capitulation to Democrats’ proposal to increase and expand Social Security benefits by taxing the wealthy.

“The American people overwhelmingly want to see Social Security expanded, not cut,” said Nancy J. Altman, president of the left-leaning group Social Security Works. “Our organization, and indeed I believe all Social Security supporters, stand firmly with the American people on what we see as this extremely wise policy.”

Mr. Trump also took heat for a budget plan that would cut Social Security’s disability payments by $72 billion over 10 years. The plan aimed to prod able-bodied workers off the disability program. The disability program’s rolls swelled from about 7 million in 2007, before the Great Recession, and remained elevated at 8.7 million in the first quarter of this year, according to the Social Security Administration.

But any moves by the administration would leave Mr. Trump a target for accusations of breaking his pledge not to touch Social Security.

Mick Mulvaney, who heads the Office of Management and Budget, argued that the president’s promise pertained only to the retirement program that is commonly understood to be Social Security, but that argument is challenged as well using Mr. Trump’s own words.

“Donald Trump claimed he would not cut Social Security, without any qualification whatsoever,” said Ms. Altman. “This is in addition to supporting radically changing Medicaid and raiding billions from Medicare, despite his promise.”

Rep. John B. Larson of Connecticut, the top Democrat on the Ways and Means Social Security subcommittee, sent Mr. Trump a letter in April asking for discussions on reform measures.

In February, Mr. Larson introduced his own bill that would increase benefits to current and future retirees. Provisions included:

• A new formula to calculate annual cost-of-living adjustments focused on the expenses of the elderly that would likely produce more generous monthly payments.

• A higher income threshold for taxing Social Security benefits — $50,000 instead of the current $25,000 for individuals and $100,000 instead of $32,000 for married couples — designed to allow retirees to keep more of their benefits.

• A guarantee to low-income workers of a monthly Social Security income that is 25 percent above the poverty line.

To shore up the program’s finances and pay for the benefits, Mr. Larson targets the wealthy. He proposes hiking the Social Security payroll tax to 7.65 percent for employers and workers and 15.3 percent for self-employed individuals for earnings above $400,000.

Wages between the current cap of $127,200 and $400,000 would remain tax free.

Mr. Larson said last week that he is still looking to make a deal with the president.

“I think there is a true opportunity to close the gap for people in the middle and enhance the benefits of Social Security, which is really the nation’s insurance program,” he said.