Yves here. The war against what little is left of the American middle class includes the ongoing campaign to squeeze Social Security and create a private, as in crappy, system in its place so as to further enrich our betters. This interview usefully unpacks, in layperson English, some of the false claims made about the program as well the implications of various “reform” measures.
By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website
Besides death and taxes, there’s one more thing you can be sure of: Americans like the Social Security program — a lot. The vast majority, despite partisanship and political rhetoric, seem to agree that a secure retirement is a good thing: Poll after poll shows that voters in the U.S. — across the aisle — strongly support Social Security and do not want to see the program cut. A whopping 9 out of 10 of them who receive benefits have a favorable view of the program. Another 80% are opposed to raising the retirement age, and the majority would like to see wealthy citizens pay more taxes on their earnings to strengthen the program.
That’s what actual people think in America.
Politicians eyeing Washington (and listening to big money donors), not so much. For them, what voters want often fades from focus, the tune changing as the political winds blow. Biden once supported cutting Social Security, now he says he wants to expand it. Donald Trump once wanted to privatize the program and called it a Ponzi scheme, now he bashes fellow Republicans for demanding changes and cuts. Ron DeSantis has talked about changing (code for cutting) the program for younger Americans, now he blasts Nikki Haley for promising to raise the retirement age for young folks if she’s elected.
In the following deep dive with the Institute for New Economic Thinking, Social Security expert Eric Laursen, author of The People’s Pension: The Struggle to Defend Social Security, dissects the rhetoric and realities of the popular program, confronting questionable claims, debunking myths, and scrutinizing misinformation around solvency. He unveils sneak attacks on Social Security that come in the form of harmless-sounding ideas like means-testing, and he exposes political ploys disguised as deficit reduction. For Laursen, Social Security is part of the glue that holds us all together — and this is no time for America to come further undone.
Lynn Parramore: Once upon a time, Donald Trump called for privatizing Social Security and raising the retirement age to seventy. Nowadays, he criticizes fellow Republicans pushing for program cuts, setting himself apart from other GOP presidential candidates. How do you view his changing stance?
Eric Laursen: Back in 2016, as a Republican nominee, Trump was the only one to not endorse “reform” of Social Security. I remember one debate very vividly when Jeb Bush and the rest of them were all talking about it and Trump said, “You’re crazy!” So you’re right, in recent years he’s really distinguished himself among his fellow Republicans in taking that stance. Frankly, it may speak to the fact that he was a more astute political candidate than any of them. It also really has to do with how the Republican Party has aged. Trump has been reading his audience better than the rest of them on this, and the older voters seem to appreciate it. Whether he really believes what he says or not is a whole other thing, but Republican voters in general seem to appreciate his position.
LP: Trump has made some pretty odd statements about why he doesn’t favor cutting Social Security, saying at a recent Fox event that he would tap into domestic oil and gas to pay for any future shortfalls. Is that realistic?
EL: No, it isn’t. The idea that you could use some portion of oil and gas revenues does not reflect the economics of Social Security or the way the program works.
LP: When Florida Governor Ron DeSantis recently spoke about Social Security in Iowa, he seemed to avoid talking directly about cuts. Instead, he expressed the view that Social Security Disability Insurance (SSDI), the part of the program that pays monthly benefits to disabled workers and certain family members, was rife with fraud. Is that true?
EL: This is what they’ve been saying forever, and no, it’s not true. If you actually look at the overall rate, the cases of fraud are pretty few and far between. Usually, they cite some numbers that sound really frightening, but if you look at the actual percentage of all beneficiaries, it’s tiny. The real problem with disability insurance is that it’s an enormously complicated system and how it’s handled varies from state to state. People asking for benefits face a woeful lack of administrative law judges in the system, and they’re the ones who have to make rulings on claims. That problem is due to Republican congresses consistently cutting the Social Security Administration’s administrative budget. It’s underfunded and there aren’t enough judges to handle claims. The rules of the disability system in this country make it very tough to claim benefits to begin with. It takes a long time. Some people die before they got their claims adjudicated.
LP: We know by now that long COVID can cause serious mental and physical health issues, but reports show that workers have a particularly difficult time getting disability benefits for it.
EL: Yes, and even if your application goes favorably, you have to expect that you’re not going to actually see any money for a year and a half to two years. If you’ve got long Covid, obviously this is a problem.
In DeSantis’s case, he’s beating a horse that the Republicans have been beating ever since Reagan. They’re essentially treating SSDI not as an insurance program, but as if it’s some type of welfare system, which it is not. It’s a very cynical ploy.
LP: Thinking of Social Security as welfare seems to be a common misperception, despite the fact that everyone working pays for this insurance to be there if they become too impaired to work.
EL: Right. And going back to Trump for a moment, this is one of the areas where his hypocrisy emerges. He says, “I’m the one who’s going to defend Social Security for you.” But he’s attacked disability benefits. It’s the long-time whipping boy for fiscal conservatives who don’t want to attack Social Security directly. This position that disability benefits are wasteful and people are getting money who are not really disabled has been a somewhat safer political tack to take if you don’t want to be seen as attacking the whole program.
Both DeSantis and Haley are similar in that they will say in broad terms, “I’m not going to take your Social Security away from you” and so forth. But when they actually drill a little bit deeper, they do start talking about taking benefits away from younger generations. Haley has talked about this, referring to her kids who are in their 20s and the need to revisit Social Security for them. DeSantis also says he’ll change the program for younger people. They try to play it as if that’s not an attack on Social Security, but it is just that. The stark reality is that younger people are the ones who are going to need Social Security even more because they’re not going to have pensions. They’re only going to have 401(k)s, if that.
LP: If they aren’t raiding those 401(k)s to pay off their student loans…
EL: Right. It’s becoming harder and harder for younger people to save. It’s harder and harder to own a home, which is really people’s primary way of saving in this country. I would say politicians are underestimating people’s intelligence if they think they are going to buy the idea of just keeping the program as it is for the current retirees but making changes for the younger people.
LP: Nikki Haley consistently talks about Social Security going bankrupt. Is it true?
EL: No, that is not correct. First of all, technically, it’s not possible for Social Security to go bankrupt. The closest you could come is that it possibly could become insolvent, which means that it’s not bringing in enough money to pay out current benefits. But even that is not really accurate, because by law, if Social Security didn’t have enough money to pay its current benefits in 2033, for example, benefits would be cut automatically to the point where they could be paid.
LP: So the law is clear that even if there was a shortfall someday in the future – which is not a certainty — people wouldn’t suddenly stop getting checks.
ER: Yes, and at that point, Congress would have to decide whether to enact changes to preserve benefits. It wouldn’t actually go bankrupt.
LP: Let’s talk about what Congress could do to prevent this from happening. The maximum earnings subject to Social Security taxes in 2024 stands at $168,600. Many argue that raising this cap would deal with any possible future funding shortfall. What’s your take?
ER: The earnings cap is ridiculously low. Raising it would solve an awful lot of the problem. But the key thing to remember about Social Security’s finances is that the last time the program was seriously restructured or revamped was 40 years ago, in 1983. When that was done, the expectation was that they were going to be making it solvent for the next 75 years, at least. But they didn’t anticipate the wage stagnation American workers have faced since then. Shrinking wages means shrinking contributions from employers’ and employees’ paychecks, so that 75-year horizon has shrunk and shrunk.
Wage stagnation is the real culprit here. People are simply not earning what they used to, which is a problem exogenous to Social Security itself. If you want to strengthen the program, you’d really be looking at wage stagnation. I’m all for raising the cap, but American workers’ wages are the key. None of these presidential candidates we’ve discussed is suggesting anything that’s going to address that.
LP: Let’s turn to the other side of the aisle. Biden has talked about raising the cap and even expanding benefits. But if you go back into his history, he wasn’t always so supportive of the program. Biden called for cuts to the program in the ’70s and ’80s, and he stated that he was open to reforms that would reduce benefits in 2005. How do you view his changing positions?
EL: You’re right, in the ’80s Biden worked closely with Bob Dole on these issues. At the time, it wasn’t so much Social Security that was the issue but this idea that the deficit was so damn high that we had to do something about it. There was a huge obsession about that in Washington. The idea was that if you don’t put Social Security into the mix, you can’t cut the overall debt and the overall deficit.
LP: Does Social Security actually contribute to the deficit?
EL. No, it doesn’t. Social Security doesn’t contribute to the deficit or the debt. It’s self-financing.
You can argue that, well, the money that goes in each year is used for other things since it’s invested in Treasury bonds, but the reality is that the program supports itself.
If you want to use Social Security as a way to bring down the debt or the deficit, you have to basically cut benefits and keep payroll taxes where they are so that more of that money can be used to fund other government activities, or retire debt. That was opposed by progressives in the ’80s because it treats Social Security like it’s any other part of the budget, which means that it’s cuttable, that the benefits are not guaranteed and you can’t rely on them. Treating Social Security in this way breaks down the wall that protects it, and that’s what was so dangerous about what politicians were doing back then. But eventually, the deficit obsession receded and pretty soon you had Dick Cheney saying that deficits don’t matter!
Since then, Biden has remodeled himself as Working Class Joe, the defender of unions, which he never really was before. But that is part of his political persona now, and it has been for quite a few years. When he says that he is opposed to cutting Social Security, what it means is that his political calculation tells him that that’s the position he has to take. That’s a fairly serious thing. If he understands that as a political fact for his life, then he will he will stick with it, at least until the political landscape seriously changes.
LP: Yet now it looks like that deficit obsession is emerging again.
EL: Yes. You had a kind of milestone a year ago when Kevin McCarthy, then the House Speaker, endorsed the idea of a fiscal commission, which would put everything on the table to reduce the deficit. That’s something that Republicans have broadly supported. The term “fiscal commission” is code for throwing Social Security into the mix, just the way they tried in the ’80s.
LP: Many will recall something like that under Obama, when Erskine Bowles, a Democrat, co-chaired a deficit commission with Republican Alan Simpson. They were both very much attacking Social Security.
EL: Yeah, exactly. Although the Bowles-Simpson Commission failed, Obama himself courted Republicans on a deficit reduction deal in 2011 and 2012. He boosted the replacement of the current CPI formula with what’s known as the “chained CPI,” which is something that Nikki Haley has endorsed.
LP: The chained CPI idea refers to changing cost-of-living adjustments to Social Security to follow this revised version of the consumer price index, which adjusts more slowly to rising prices. How would using it affect the program?
EL: Using the chained CPI would drastically cut benefits over time. It would make Social Security less and less significant as a bulwark against poverty.
LP: Proponents claim it’s a more accurate reflection of inflation than the regular CPI measure currently in use. Is it?
EL: It’s not more accurate for elderly people, for whom health care costs and housing costs loom much larger. But now that Haley has endorsed this zombie idea, it’s back again. My point about the deficit now is that since it was an obsession in the ’80s – and Joe Biden really bought into that obsession — I can’t be confident that he wouldn’t follow that particular siren song again.
LP: And once re-elected, we can’t be sure what he would do.
LP: Speaking more broadly of the party, Democrats today are pretty vocal about supporting Social Security. Senator Bernie Sanders and Senator Elizabeth Warren introduced the Social Security Expansion Act in February 2023 to provide updates and increase benefits, reflecting the reality that voters like the idea of expanding the program. Yet their plan doesn’t seem to get traction. Why aren’t Democrats making sure that it does?
EL: Ideas about updating and expanding Social Security have been around for a while now. Sanders endorsed them back in 2016. Hillary Clinton even somewhat cautiously endorsed them then. But yeah, they keep getting pulled off the table, partly because people keep raising this idea of Social Security going bankrupt. They say, how can we improve benefits when Social Security is going to go bankrupt, etc?
LP: Even though, as you noted, the program can’t technically go bankrupt.
EL: That’s correct. And they’d say it even though some of the updates we’re talking about in terms of a minimum benefit or raising benefits modestly for everybody wouldn’t actually contribute much to any possible future shortfall. But this bankruptcy claim just always comes up. Frankly, there aren’t enough politicians, even in the Democratic Party, who have that much commitment to Social Security. If you talk to Bernie Sanders, he’s pretty committed, but even in 2016, Hillary Clinton was really cautious about it. Al Gore could talk about it in 2000 because there was a budget surplus and this kind of thing seemed much more doable in Washington terms. But now the Democrats aren’t really serious about it.
LP: Another idea surfacing in this presidential cycle is means-testing — doing away with benefits for wealthy people in the name of saving money. Some Democrats have looked on it positively even though the idea is more associated with the GOP. In 2011, when Obama was talking about that chained CPI you mentioned, he also talked about means-testing Medicare. Recently, Nikki Haley has been touting means-testing for Social Security. What’s your view on it?
EL: Well, it’s an attack on the program. There are a hell of a lot of billionaires in the United States now, but if they all gave up all their benefits, it really wouldn’t make a whole lot of difference in terms of Social Security’s fiscal situation. It’s just not enough.
LP: The rich people only get a couple thousand a month like everybody else. Drop in the bucket.
EL: Right. The other problem is more fundamentally political. Talking about means-testing is something that sounds good and sounds fair, but Social Security is a social insurance program. The idea is that everybody pays in and everybody gets benefits. In a modest way, it’s part of the glue of our society
LP: Like everybody pays taxes to support public schools, and you can send your kids no matter what your income is.
EL: Yes. It’s one of the more egalitarian things in a less and less egalitarian society. The problem is that if you means-test Social Security, then upper-income people no longer have any stake in it. Social Security effectively becomes a welfare program. And welfare programs in this country get cut.
LP: And stigmatized.
EL: Exactly. If you can means-test it for people in the top 5%, then what’s to stop you from means-testing it for people in the top 10% a few years later? Or the top 15%? On and on it goes, because essentially, politicians can always look at the remaining population that gets it and say, well, they don’t really need this, or they don’t really need this much. That’s how the cycle works.
It’s really about attacking the whole idea of social insurance. The idea that you are entitled to something simply because you have been a working person is a problem philosophically for Republicans. That’s why they love means-testing. Nikki Haley started talking about this maybe three or four months ago when it was looking like her profile was growing. She was assiduously courting the billionaire class. You had Ken Langone of Home Depot talking enthusiastically about her, and he was coupling that very specifically with her stand on Social Security, saying, hey, I’m a billionaire. It’s ridiculous that I get benefits, etc. Haley knew her audience very well.
When you start talking about the deficit, and you start talking about means-testing Social Security, you’re going to appeal to the billionaire class and a good part of the Washington policy-making and pundit community.
LP: Let’s talk about what Social Security means to different generations. A recent article in Business Insider highlighted increasing rates of homelessness among younger baby boomers who can’t keep up with the high costs of growing older in America. The author suggested that current Social Security payments aren’t enough to prevent this. What do you think?
EL: We need to expand benefits, but a really big part of the problem is the lack of long-term care. You’ve got a population living increasingly to ages where they simply can’t live on their own so they get shuttled around, or at worst end up homeless. There’s a desperate need for a viable long-term care benefit program in this country. Long-term care insurance is a classic case of a failure of the private sector. It’s something it can’t do. This type of insurance is incredibly expensive — if you can get it at all.
LP: And even if you have it, insurance companies often find ways to avoid paying claims when you need it.
ER: Yes, they’re fighting tooth and nail not to pay. But the debate about Social Security’s fiscal situation has made it really difficult to even talk about things like this. On the state level, there have been attempts to enact some kind of long-term care insurance, but they have not worked. It is expensive, but it’s something we’re going to have to face unless we want to have more people living on the streets.
LP: How about younger people who may not think the issue of Social Security is that urgent for them?
ER: I find it ironic that people in their late 20s or early 30s would think this is not their issue when so many of them are living with their parents. They may never own a home. With the gig economy, there’s more working under the table, which impacts Social Security contributions and benefits. Social Security urgently needs to be updated to address these issues, but the whole bankruptcy discussion over the last 40 years keeps sucking the air out of the room. There’s no movement on the federal level.
LP: What, in your view, is the most important thing we need to do to update the program itself?
ER: If we’re talking strictly about Social Security, there are two things. Number one is that there should be a modest boost in benefits at all levels, because Social Security, right now, on average, only meets maybe 32% of one’s income needs in retirement. That’s not enough. So that needs to be improved. Secondly, there needs to be a more effective minimum benefit that will keep people out of poverty. Supplemental Security Income (SSI) does that to some extent, but it’s a really patchwork system that’s constantly under attack. If you want to have something that would specifically keep people above the poverty level, it needs to be done within Social Security, within the old age income system. Otherwise, it’s too vulnerable.