The biggest contrast in the 2024 election —other than democracy vs. 'blood in the streets'

One of my goals in this daily letter to you is to give you the facts and analysis you need to make informed decisions, especially political ones — and equip you to spread the word to others. So here goes on social security.

During a typically rambling and incoherent interview last week, Trump admitted he would cut Social Security and Medicare if reelected. “There is a lot you can do in terms of entitlements, in terms of cutting and in terms of also the theft and the bad management of entitlements.”

Trump has tried to walk back the remarks, saying that when he used the word “cutting” he didn’t actually mean “cutting,” and that Social Security has a lot of waste. (In fact, Social Security is well managed, and theft or fraud is rare.)

But there’s no question Trump and his Republican allies want to cut Social Security and Medicare.

Here’s why. At the heart of their economic agenda — at least the portion they’re sharing with their super-wealthy backers — is another giant tax cut for the super-wealthy and big corporations.

The problem is that this tax cut would cause the federal budget deficit to explode — as did their last tax cut for the wealthy — unless Social Security and Medicare are cut. (Remember that as president, Trump repeatedly included cuts to Social Security and Medicare in his official budget proposals.)

This is why Trumpers have been ramping up calls for cuts in Social Security (or raising the age of eligibility, which is the same thing).

Last week, Daily Wire founder and professional bloviator Ben Shapiro — oblivious to the fact that millions of Americans do hard work that takes a toll on their bodies — urged that the retirement age be raised. “No one in the United States should be retiring at 65 years old. Frankly, I think retirement itself is a stupid idea unless you have some sort of health problem.” Turning Points USA founder Charlie Kirk echoed Shapiro: “I’m not a fan of retirement. I don’t think retirement is biblical.”

I want to be clear with you about Social Security. (I was once a trustee of the Social Security Trust Fund, so I know about this issue.)

Even without another Trump Republican tax cut for the rich, America still faces a pending problem financing Social Security. (Medicare is less problematic because the rise in health care costs has slowed, probably due to the Affordable Care Act.)

That’s because the American population is aging, with a rising ratio of retirees receiving Social Security benefits to workers paying into Social Security.

The Congressional Budget Office expects that over the next 20 years, spending on Social Security and Medicare will rise by about 3 percentage points of GDP.

In their annual report, the trustees of the Social Security Trust Fund said that Social Security will be able to pay full benefits for another decade but thereafter faces a significant funding shortfall. Unless something changes, after 2034 it will be able to pay only about 80 percent of scheduled benefits.

But this pending problem in no way requires cuts to Social Security benefits or increases in the retirement age.

In sharp contrast to Trump, Biden correctly asserts in his new budget that Social Security (and Medicare) can remain solvent by raising taxes on high incomes rather than by cutting benefits.

The problem isn’t that the giant baby-boom generation is sucking up too many Social Security benefits. The Social Security trustees anticipated the boom in boomer retirements. This is why Social Security was amended back in 1983, to gradually increase the age for collecting full retirement benefits from 65 to 67. That change is helping finance the retirements of boomers (like me).

So what did the trustees fail to anticipate in 1983 when they raised the retirement age for collecting full benefits? Answer: the degree of income inequality in 21st century America.

Put simply, a big part of the American working population is earning less than the Social Security trustees (including me) anticipated decades ago — and therefore paying less in Social Security payroll tax.

Had the pay of American workers kept up with what had been the trend decades ago — and kept up with their own increasing productivity — their Social Security payroll tax payments would have been enough to keep the program flush.

At the same time, a much larger chunk of the nation’s total income is going to the top than was expected decades ago.

Here’s the thing: Income subject to the payroll tax is capped. Not a single dollar of earnings in excess of the cap is subject to Social Security payroll taxes. This year’s cap is $168,600.

Which means, for example, that Jeff Bezos finished paying all his Social Security payroll taxes due this year at around 7 minutes into January 1.

The Social Security cap is adjusted every year for inflation, but the adjustment is tiny compared to what’s happened to incomes at the top.

As the rich have become far richer, more and more of the total income earned by Americans has become concentrated at the top. Therefore, more and more total income escapes the Social Security payroll tax.

The obvious solution to Social Security’s funding shortfall, therefore, is to lift the cap on income subject to the Social Security payroll tax, so the super-rich pay more in Social Security taxes.

To make sure it’s the super-rich — and not the upper-middle class — who pay, it makes sense to eliminate the cap altogether on earnings in excess of, say, $400,000.

As it happens, Biden’s plan does exactly this.

So there you have it: Trump and his regressive mouthpieces want to cut Social Security so they can give another giant tax cut to the super-rich.

Biden wants to save Social Security by having the super-rich — who have become far richer over the past several decades — pay more Social Security taxes.

The contrast couldn’t be more obvious or more important. Please help get the word out.

Robert Reich is a professor at Berkeley and was secretary of labor under Bill Clinton. You can find his writing at https://robertreich.substack.com/.