President Trump is a master showman, but an amateur magician. Look at the trick he’s trying to pull on Social Security. He warms up his audience with a grand promise—“I will not cut one penny from Social Security.” Then he riles them up: he’ll even cut their taxes, by eliminating the tax Social Security beneficiaries pay on their benefits. But it’s all a sleight of hand.
The trick is done in two parts.
The first part is what he wants you to pay attention to: the big pledge — not only to protect Social Security, but to make it even better. He won’t cut your benefits; he’ll cut your taxes. Because of how enticing this sounds, he’s hoping it will be an adequate distraction — that while today’s retirees are cheerleading for their newfound tax savings, none of us will notice part two.
To finance his plan, President Trump will loosen the spigot out of the Social Security trust funds — exacerbating the ongoing drawdown of these government accounts that hold the money all of us pay into the program. Because it’s just a slow drip, he’s counting on no one noticing. Just like a teenager taking a little bit out of his parents’ liquor bottle every weekend, praying they can’t tell the difference. It works until it doesn’t.
In about ten years’ time, the Social Security trust funds will be bled dry. When the next generation of retirees comes around, they’ll find that not only did they miss out on the tax savings the president is promising today, but they won’t even get the full benefits they’ve been promised their whole lives. That’s because while President Trump had us rapt with his bold promises, he instructed congressional Republicans to mortgage future generations to pay for trillions of dollars in tax cuts for America’s wealthiest families.
Those tax cuts will send our country’s debt spiraling, leaving a future president with few ways to replenish the trust funds. Instead, President Trump’s successor will be left with little option but to cut retirees’ checks or raise the retirement age. By then, President Trump and his billionaire pals will be enjoying the money they’ve sucked out of the system and leaving the rest of us to deal with the consequences.
It doesn’t take Benoit Blanc to see through this charade. Just follow the numbers.
Let’s start with the trust funds.
About half of Social Security beneficiaries already don’t pay a tax on their benefits because they have lower incomes. On the other hand, the top 20 percent of retirees—those making over $205,800 — pay 20 percent. This group of the richest retirees are the ones who will benefit the most from the President’s proposal, saving $7,250 per year.
Today, by law, about three-fifths of those tax revenues go into Social Security trust funds, helping to keep them solvent. By no means do they make up the bulk of the trust funds’ revenues, but, by one estimate, one of the funds would run out of money a full year earlier without these revenues. And when the trust funds run out of money, 81 million retirees, people with disabilities, and their families will only receive a fraction of what they are owed unless the president and Congress figure out a way to make up the difference.
It’s true that we’ve long known that under current policy, the trust funds are slated to run out of money in a decade. President Trump’s proposals will make them run out quicker and make it nearly impossible to fund them anew.
That’s because the president has called on Congress to extend his 2017 tax cuts, which cost $4 trillion over ten years and funnel the bulk of the savings to the wealthiest Americans. He wants to run up the tab, knowing that the bill will come due in about ten years, right around the same time the trust funds will be exhausted and when he will be long gone from office.
When that happens, a future president and Congress would normally have a choice. They could raise taxes, they could cut benefits, or both. President Trump’s tax plan will tie their hands.
It will chart America’s debt to a path of unsustainability where future policymakers will have to make drastic decisions. To start, President Trump’s successors will certainly need to hike taxes to be able to pay off our existing debt, protect our national security and respond to crises like natural disasters or a pandemic. If, on top of that, they need to shore up Social Security, they could raise taxes even further, perhaps to a level unprecedented in post-war years. But what’s more likely is they will start to slash Social Security — at the cost of retirees, future generations or both.
No magician likes a ruined trick. But if Trump’s tax bill reaches his desk and he says it will make Social Security great again, now you will know what’s really going on.
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