Social Security again targeted for cuts

 

Bill Knight column for 9-7, 8 or 9

 Less than a day after President Trump at the Republican National Convention pledged to safeguard Social Security and Medicare (like he said during the 2016 campaign), he let companies stop collecting some Social Security taxes, jeopardizing the popular programs. Besides progressives, some conservative Republicans and the Chamber of Commerce and other businesses oppose the scheme.

Employee’s 6.2% payroll deductions are listed on checks as FICA, for Federal Insurance Contributions Act. It’s essentially an insurance premium like folks pay for cars, health insurance, homes, etc., except employers also contribute 6.2% to fund Social Security and Medicare.

Also, the halt is temporary, through Dec. 31, a “deferral,” meaning that the uncollected payments would have to be repaid in 20,21. Plus it only applies to those who still have jobs and make less than $104,000 a year.

Two-thirds of any benefit would go to the richest 20% of Americans, according to the Institute on Taxation and Economic Policy, which also showed that the poorest 20% would get about 2% of the benefits.

In other words, low- and middle-income workers are being offered a modest tax cut for a few months in exchange for less-secure retirements. How modest? Someone making $35,000 a year would save about $42 a week, but have to repay $750 next year, according to the Chamber of Commerce.

Social Security advocates are aghast and angry.

Stephen Goss, chief actuary at the Social Security Administration, said that the four-month cut could cause the Social Security Disability Insurance Trust Fund to be depleted by mid-2021, and reserves in the Old Age and Survivors Insurance trust fund “would become permanently depleted by the middle of calendar year 2023, with no ability to pay… benefits thereafter.

“While benefits scheduled in the law … are obligations, such obligations can only be met to the extent that asset reserves are available,” said Goss, a 30-year SSA veteran. “The law does not provide authority for the trust funds to borrow in order to pay benefits beyond the limited authority for ‘advance tax transfers.’ This limited authority allows all payroll tax income expected for a month to be advanced to the beginning of that month if needed to meet benefit obligations on a timely basis. Thus ... benefit obligations could not be met after the depletion of the asset reserves and elimination of payroll taxes.”

Besides the deferral creating more red tape for employers, “Many of our members consider it unfair to employees to make a decision that would force a big tax bill on them next year,” according to a letter to the White House and Congress from a coalition of about 30 business groups, including the Chamber of Commerce. “It would also be unworkable to implement a system where employees make this decision.”

Of course, U.S. Presidents don’t have the authority to enact or repeal taxes, but Trump’s order echoes the desire to eliminate or privatize Social Security that’s been a long-time goal by the Right, which sometimes implies Social Security benefits are unearned welfare giveaways, not insurance.

“They’re not a handout,” Dan Adcock, with the National Committee to Preserve Social Security and Medicare.

Other defenders of the programs criticized the President as well as the idea.

“If Donald Trump is re-elected, Social Security will cease to exist before the end of his second term,” Nancy Altman, president of Social Security Works, told CNBC.

Previously, Trump called for steep cuts in the programs. For example, his 2020 budget blueprint called for $845 billion in cuts to Medicare and $25 billion in cuts to Social Security. And in May, Congressional leaders discovered that the State Department had been working on the “Eagle Plan” to cut Social Security.

 “Jeopardizing retirement security during a health and economic crisis that disproportionally impacts older Americans is not the right time,” said U.S. Rep. Julian Castro (D-Texas). “We should only be strengthening Social Security.”

The Eagle Plan, said Alex Lawson, director of Social Security Works, would “force people to choose: Go hungry today or work until you die.”

Making matters worse, Trump also said that if he wins in November, he’ll “terminate the payroll tax … We’ll be paying into Social Security through the General Fund.”

Since the payroll tax generated about $1 trillion last year, according to U.S. government data, ending it could cause a need to replace it with tax hikes.

Or dissolve it.

“Trump has shown himself willing to undermine the Post Office, the free press, and other institutions,” Altman said. “If he's re-elected, our Social Security system is his next target.”