One of the presidential candidates is a key reason
By Chris Farrell for Next Avenue
I love Social Security. Seriously. Social Security was signed into law by President Franklin Roosevelt in 1935 and over time has evolved into America’s most successful pension and insurance program. Social Security helps keep millions of America’s elderly out of poverty, too.
Those aren’t particularly controversial sentiments, except in bitterly polarized Washington, D.C. Conservatives have routinely called for cutting back on Social Security’s “unaffordable” benefits and “privatizing” the system. Social Security, they say, is “bankrupt” and a “Ponzi scheme.” Liberals have staved off Social Security benefits cuts in recent years largely through a defensive strategy of preserving the status quo established by the 1983 National Commission on Social Security Reform.
But things are changing — bigtime.
Partial credit goes to Donald Trump
Thanks to the political rise of Donald Trump, the aging of the baby boom generation and wage stagnation among those approaching retirement, I believe the signs are unmistakable that the politics of the 81-year-old program are taking a major turn, and for the better.
As I see it, the debate in coming years will shift toward how best to preserve and even increase Social Security benefits, rather than trim them or turn the money over to Wall Street.
Other savvy Social Security analysts agree with me. “I think that you are seeing the end of the effort to cut Social Security,” said Brookings Institution demographer William Frey on a panel at the recent Aging in America conference I attended in Washington, D.C. “We will see increasing pressure to boost Social Security benefits because of declining private retirement income.”
Voters oppose benefits cuts
American voters want to see that happen, too.
When asked about the long-term future of Social Security, 71 percent of registered voters recently surveyed by the Pew Research Center said that benefits shouldn’t be reduced in any way. And this has become a bipartisan sentiment. Clear majorities of Democrats (72 percent) and Republicans (68 percent) opposed Social Security benefit cuts, according to the Pew study published in March. (See the chart for more details.)
Instead, to shore up Social Security — which is expected to run into financial difficulties in the 2030s — there’s solid support for raising or even eliminating the cap on earnings that are subject to the payroll tax (now $118,500), something both Democratic candidates said they favored in last night’s debate. A poll by the National Academy of Social Insurance found that 71 percent of Republicans and 92 percent of Democrats agreed that top earners should pay more into Social Security.
Let’s take a step back for a moment to see how we got to this moment.
A look back at the politics of Social Security
The politics of Social Security has gone through two major transformations before. The first phase lasted from the early years of the program until the beginning of the 1990s, and featured a consensus about the program’s legitimacy. Benefits increased incrementally during this period, mostly propelled by robust economic growth after WWII as well as the dominance of center-right Republicans and center-left Democrats on Capital Hill. Any disputes between conservatives and liberals revolved around the degree and speed of benefits expansion.
Perhaps a 1954 letter from Republican President Dwight Eisenhower to his brother best captures the sentiment of the era:
“Should any political party attempt to abolish Social Security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid. ”
His words read quaint these days, don’t they? The Social Security consensus began breaking down during the hard economic years of steep unemployment and high inflation in the ’70s and early ’80s, especially during the terms of Jimmy Carter and Ronald Reagan. Conservative critics gained an audience forcefully raising alarms about the system’s future soundness with the aging of the population. A loose coalition of interests ranging from conservative think tanks to financial services firms pushed the case for privatizing, or at least partially privatizing, Social Security. “Privatizing” essentially means transforming Social Security into a private pension plan reminiscent of a 401(k), where savers direct all or part of their Social Security contributions into their own accounts and are responsible for investing the money. “Wall Street saw privatization as a golden egg,” says Lawrence Jacobs, director of the Center for the Study of Politics and Governance at the Hubert H. Humphrey School.
Phase two in the politics of Social Security dates to the mid-1990s with the rise of Republican House Majority Leader Newt Gingrich and his ideologically driven brand of politics. During President Clinton’s and George W. Bush’s tenure, the push for privatization and cutting benefits moved from the fringes into the mainstream. Clinton flirted with partial privatization and Bush spent considerable political capital in 2005 pushing his own partial privatization plan. Bush’s effort failed to gather much popular support, though. Part of the reason is that voters weren’t convinced Social Security was in crisis, let alone in danger of imminent collapse, notes William Galston, senior fellow at the Brookings Institution in a retrospective analysis. Public doubts about personal accounts intensified the more people learned of the details, adds Galston.
Nonetheless, conservatives have continued to embrace this rhetoric. Current House Speaker Paul Ryan has been a long-time proponent of privatizing Social Security in his various budget proposals and one staple of modern conservative commentary has been that the swelling ranks of boomers is pushing the U.S. toward an inevitable fiscal crisis unless benefits are cut.
Until now. Although dating transformations is always a tricky business, historians may well highlight the beginning of the third shift in the politics of Social Security to March 10, 2016. During the Republican debate in Miami that night, CNN’s Jake Tapper asked: “What you candidates intend to do to keep Social Security going for future generations?” Sen. Marco Rubio focused on raising the retirement age; Sen. Ted Cruz and Gov. John Kasich mentioned private accounts. This was the standard rhetoric of phase two Social Security conservatism.
Then, Donald Trump weighed in, saying “and it’s my absolute intention to leave Social Security the way it is. Not increase the age and to leave it as is.” Says Jacobs: “I was watching that debate when he made that statement. The contrast between Trump and everyone else. He has a strong sense of his supporters, Tea Partiers and seniors.” (Indeed, in the recent Pew survey, 73 percent of Trump supporters were against reducing Social Security benefits. Similarly, 66 percent of Cruz supporters and 62 percent of Kasich supporters felt that way as did 72 percent of Sanders supporters and 71 percent of Clinton supporters.)
The turn among conservative voters
Most rank-and-file conservative voters now support preserving Social Security benefits, and with good reason. The combination of wage stagnation and inadequate retirement savings means the idea of reducing benefits is anathema to many boomers. To be sure, Cruz, Kasich and some other leading Republicans continue to call for private accounts. But it’s hard to believe there is much popular conservative support for turning Social Security money over to Wall Street following the financial crisis of 2008.
Of course, rightwing think tanks will keep badmouthing Social Security because they oppose any large-scale government programs. Grassroots conservatives aren’t buying, though. Tea Party conservatives strongly believe they have “earned” their Social Security benefits through years of hard work, say Harvard University scholars Vanessa Williamson, Theda Skocpol and John Coggin in their research article, The Tea Party and the Remaking of Republican Conservatism. A majority of Tea Party supporters surveyed say they also prefer new revenues rather than cutting benefits to sustain Social Security over the long haul.
(I imagine Franklin Roosevelt jauntily grinning at the news. To protect the system from being dismantled, it was designed so workers were “earning a right” rather than qualifying for the “dole,” historian W. Andrew Achenbaum has written.)
Democratic White House candidates Hillary Clinton and Sen. Bernie Sanders are campaigning on expanding Social Security benefits. Sanders has called for, among other things, raising the minimum benefit and an across-the-board increase for most recipients. Clinton’s approach is more targeted, aimed largely at boosting benefits for widows and those who’ve taken time out of the paid labor force to raise a child or care for aging parents.
Sanders says he’d pay for the improvements by raising the cap on earnings that can be taxed for Social Security “so that everyone who makes over $250,000 a year pays the same percentage of their income into Social Security as the middle class and working families.” Clinton has also expressed support for “asking the highest-income Americans to pay more, including options to tax some of their income above the current Social Security cap,” although she hasn’t yet attached any numbers.
Nevertheless, as this testy exchange during last night’s Democratic debate in Brooklyn, N.Y. demonstrates, despite the heated rhetoric both are in basic agreement:
Sanders: Are you or are you not supporting legislation to lift the cap on taxable income and expand Social Security for 58 years and increase benefits…
Clinton: I am…
Sanders: — yes or no?
Clinton: I have said yes, we are going to pick the best way or combination…
The Democratic Party will continue to move toward a platform of eliminating the cap altogether to keep the trust fund solvent for awhile and to pay for higher promised benefits. For example, according to calculations by Stephen Goss, chief actuary at Social Security, the Sanders approach is sufficient to extend the projected year of Social Security reserve depletion from its current 2034 to 2074.
Republican legislators are likely to grudgingly accept a somewhat higher cap, but just enough to avoid trust fund insolvency by the mid 2030s. Republicans will eventually mute their call for raising Social Security’s Full Retirement Age from today’s 66-to-67 to, say, 68 or 70. First of all, that proposal is a clear benefit cut that doesn’t go over well with grassroots conservatives. More importantly, the enthusiasm for raising the retirement age will fade with disturbing evidence that life expectancy is declining among lower income, less educated middle-aged, whites in the U.S.
What’s more, this disguised benefit cut isn’t worth pursuing at the moment, since the its impact is surprisingly small on the system’s solvency. The conservative legislator mantra will shift from benefit cuts and privatization to preserving the status quo, acting as responsible stewards of existing benefits rather taking the risk of expanding benefits.
Taken altogether, this turn is a healthy political development for all generations.