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Considering how important retirement security is to most Americans, the presidential candidates have spoken relatively little about it.
In the final presidential debate on Thursday, President Trump and Democratic presidential candidate Joe Biden touched lightly on Social Security, though only to say neither one would help the program. Trump accused Biden of “destroying your Social Security.” Biden said if the president continued his plan to withhold payroll taxes, the program would be bankrupt in three years.
“The idea that Donald Trump is lecturing me on Social Security and Medicare?” Biden said. “Come on.”
A plan can’t come soon enough. Social Security is in trouble, which means Americans’ future retirement security could be as well. The two trust funds that support the program are expected to run out of funds within 15 years, according to the Social Security Administration’s trustees report, at which time beneficiaries would still get paid — but only about 80% of what they are owed. This would be detrimental to the millions of people who rely on the program for some, if not most, of their retirement income. Fixing it is urgent to keep millions of seniors from poverty.
Trump has said if he were re-elected he would want to cut the payroll tax, which is the major source of funding for the program, and instead perhaps pay for it through the general tax fund, which comes mostly from income taxes. Comparatively, Biden has laid out a proposal to enhance the program as well as other benefits for older Americans, the candidate said on his campaign site.
“What is commendable about Biden’s plan is that he actually has one, taking the financial challenges facing Social Security seriously,” said Richard Johnson, senior fellow and director of the program on retirement policy at Urban Institute, a nonprofit think tank.
See: Social Security missteps could push millions of elderly Americans into poverty
Biden has made suggestions to improve Social Security, including increasing payroll taxes to earnings above $400,000, compared with its current $137,700. Such a change would result in 6% of workers contributing more by 2050, according to the Tax Policy Center, but could come with political pushback as it requires only higher earners to make “additional sacrifices,” the center said.
Right now, the cap on payroll taxes that go toward Social Security is $137,700, which means earnings above that limit are not contributed to the program. By increasing the earnings cap, a quarter of the program’s long-term funding deficit would be closed and the lifetime of the trust funds would gain about five years, according to an Urban Institute research report.
“He addresses the long-term solvency by adjusting the cap,” Max Richtman, president of the National Committee to Preserve Social Security and Medicare, said of Biden. “That would make the program solvent for practically the rest of the century. He is committed to protecting it.”
Other research centers have looked at the potential impact of Biden’s plan on the program as well.
The Democrat also proposes a minimum benefit under his plan, where beneficiaries who worked 30 years would get a benefit no less than 125% the federal poverty level. Biden’s campaign called the current minimum benefit “entirely ineffective.” Biden’s plan also touches on restrictions to teachers and other public-sector workers.
Still, Biden’s plan doesn’t solve Social Security’s problems, said Brenton Smith, an analyst who writes about Social Security.
“It needs detail,” Smith said. There are factors that require more thought, such as the way credits will be used for benefits and looking more closely at who gets benefits and why. “They need to simplify the system,” he said. “They need to look to reform and fix the system before they look for ways to pay for it.”
Also see: Trump’s election year gamble: Messing with Social Security and Medicare
Critics also say Biden’s plan has a major deficiency: it doesn’t take into account the impact COVID-19 will have on the program — even though the effects of this pandemic could be catastrophic on the future of these benefits, Smith said. The Social Security Administration uses various factors to calculate benefits, including the growth of average wages in the country since the year the earnings were received. Millions of Americans were out of work or saw a reduction in benefits because of the pandemic, and many others will take on part-time work, affecting the formula.
“COVID is going to come and rewrite things next year,” Smith said.
Social Security is often called the “third-rail” of politics, since Americans are so passionate about the program, and politicians may not want to lean toward controversial proposals about higher taxes or benefit cuts.
“What is striking about what we have seen recently on the Democrats side is there is an appetite for Social Security reform,” Urban Institute’s Johnson said. Multiple candidates have put forth plans for Social Security, including Sen. Bernie Sanders and Rep. John Larson. “As soon as Congress addresses the problem, the easier it is to fix.”
Still, finding bipartisan support for a solution may be challenging, Johnson said.
The president hasn’t laid out a specific proposal for Social Security, but his remarks about cutting the payroll tax and using general revenue could be harmful to the program, experts said. Earlier this year, the president said he was allowing companies and employees to defer payroll taxes, if they so choose. This would mean more money in the paychecks of working Americans, at least temporarily. Because it’s a deferral, the money would need to be paid back unless the government says otherwise.
Forgoing the tax completely would alter Social Security indefinitely. Social Security does take in other funding streams, but the payroll tax is the largest, Richtman said. “That is a surefire way to strangle the funding stream and the program would disappear,” Richtman said. “That’s tantamount to destroying the program.”
