Regardless of what President Joe Biden and former President Donald Trump promised you, and regardless of its past status as an untouchable “third rail” in American politics, Social Security is going to look one way or another over the next 10 years Revise. While both candidates are misleading voters, the party that has the most to lose by ignoring Social Security issues is the Republican Party.
First, some background. Some people still believe that Social Security payments are in an account with their name on them, or that they believe that Biden and Trump will not touch the program’s promises, but that doesn’t matter. If Congress fails to act before the Social Security trust fund expires, benefits will automatically be cut by about 20%. When there are no more assets to fill the gap between payroll tax revenue and benefits paid out — and not enough taxes have been collected to pay for Social Security since 2010 — the program will revert to pay-as-you-go system.
This is the law. The Social Security Administration will only be able to pay benefits that are covered by payroll taxes, reducing benefits.
This is an unchangeable reality. When Biden and Trump tell you they won’t touch Social Security, they are silently admitting that they will cut their own benefits by 20%. This is one way. However, other politicians fear a backlash from hordes of angry voters on Election Day and do not want such cuts to occur. So what else could happen?
If the Republican Party, which has touted itself as the party of fiscal responsibility for most of its history, fails to advocate for and implement meaningful reforms before the trust fund dries up, or even if they wait until the last minute, they will leave the door open for Democrats to use their Solve problems the way you like. Historically, Democrats have favored maintaining or even expanding Social Security. Their solutions may involve raising taxes and increasing government debt.
Higher taxes could come in many forms, such as payroll tax increases, higher income taxes or new taxes on wealthy individuals. While this approach may maintain benefits in the short term, it is also likely to slow economic growth by reducing incentives to work, start businesses, and invest.
Another possible scenario is to use more government debt to make up for the social safety gap. This means issuing more government bonds, which the government eventually has to pay back with interest. Higher levels of national debt could cause interest rates to rise, crowding out private investment and possibly exacerbating inflation. Furthermore, the burden of this debt will fall on future taxpayers, exacerbating intergenerational inequality.
Republicans must recognize the urgent need to reform Social Security, if only to protect themselves. Reasonable options include gradually raising the minimum retirement age, adjusting benefits to reflect longer life expectancy, and implementing fair means testing to ensure benefits go where they are actually needed. In addition, encouraging private saving and investment through tax-advantaged accounts can help reduce older Americans’ dependence on government programs.
I understand why Republicans think they can’t win anything by reforming Social Security even if they’re in power. That is, they overlook a benefit.
The Congressional Budget Office (CBO) is known for projecting the future path of the debt-to-gross domestic product (GDP) ratio based on current (but not necessarily future) policies. That means its forecasts may include tax increases and spending cuts that won’t happen. There is one exception to this rule: when it models the effects of depleting the Social Security trust fund. In this case, the Congressional Budget Office assumes that general revenues (i.e., debt) will be used to cover the Social Security gap, rather than showing the benefit cuts currently required by law.
Republicans could use this to their advantage if they were willing to reform Social Security once they regain power. (The same goes for Medicare reform.) In fact, the Congressional Budget Office projects that Social Security reform will lower future debt—a long-awaited cut and potentially a huge win that Republicans can use to regain fiscal responsibility. Mantle. This time, we can easily see the evidence in the numbers.
But failure to act will result in a fiscal situation where Republicans will have little leverage while Democrats push for their preferred “solutions.” The resulting higher taxes and increased debt will have profound and unhealthy consequences for the economy and future generations. By comparison, if Republicans make smart reforms, they will get a lower and more straightforward debt path. It’s a win-win.
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