What Trump and Biden Would Mean for Social Security

By Yuval Rosenberg

Stimulus Failure Sets Up Post-Election Clash

With a coronavirus relief bill now pushed to the back burner, it
looks like Congress will have to address two major fiscal issues in
the lame-duck session following Election Day: the roughly $2
trillion relief package still being hashed out by House Speaker
Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin, and
legislation to prevent the government from shutting down when a
stop-gap funding deal expires on December 11.

As Roll Call’s Jennifer Shutt
reports Wednesday, lawmakers kept the stimulus and
government funding packages separate earlier this year, with
Congress successfully passing a bill at the end of September that
extended funding for the federal government until mid-December. But
in the lame-duck session following the election, that may
change.

Pelosi has signaled that the two issues may end up being
addressed at the same time. “In the lame duck we’ll have to pass
stimulus or we’ll have to put provisions in the appropriations bill
to keep government open,” she said earlier this month.

Trouble ahead? President Trump has
predicted that he will sign “the best stimulus
package you’ve ever seen” after the election, but there are serious
questions about how those negotiations could play out, with much
depending on how things go at the ballot box. If Trump loses, it
may be difficult if not impossible to come up with a deal, given
the president’s sometimes erratic behavior, which could become more
pronounced following a bruising defeat. (“He throws fits almost
every day as it is; it'd be hard to tell the difference,” Sen.
Patrick J. Leahy, a Vermont Democrat, said last week.)

If conditions in Washington — including a Republican-controlled
Senate that has shown little interest in passing another
multi-trillion-dollar relief bill — make it impossible to pass a
stimulus bill in the lame-duck session, lawmakers may follow
Pelosi’s lead by including crucial relief spending such as
unemployment aid and small business loans in the government funding
bill.

That may simply set up another clash, with lawmakers fighting
over funding levels for both the government and the relief package.
House Republicans opposed the inclusion of $250 billion in pandemic
relief funds in the stop-gap funding bill a few months ago, and
while some have signaled that they would be willing to change their
minds, negotiating final numbers could be difficult and time
consuming — a particularly challenging task during a lame-duck
session.

Threat of a shutdown: A major clash between the two sides
could result in a government shutdown. “If party leaders and the
White House can’t reach agreement on at least another stopgap
measure before Dec. 11, a partial government shutdown would begin,”
Shutt says. “That would be more disruptive than the 35-day shutdown
in late 2018 and early 2019 that began over a border wall funding
dispute.”

Another way out: G. William Hoagland
of the Bipartisan Policy Center tells Shutt that he doesn’t think
Congress will pass either a relief package or a full government
funding bill this year. “It's too much too quickly,” he said. But
that doesn’t mean a shutdown is likely. Instead, Congress could
follow the time-honored tradition of punting on a difficult issue
by passing another stop-gap funding bill, sweetened with a little
bit of relief spending. “Something in my gut tells me it's a
continuing resolution with an adjustment for COVID,” Hoagland
said.

What Trump and Biden Would Mean for Social Security

After years of warnings about the financial challenges facing
Social Security, the coronavirus pandemic and its economic effects
mean that the time to get serious about ensuring that full benefits
keep flowing is now, writes Tara Siegel Bernard in
The New York Times: “If nothing is done to shore
up the program, all benefit checks would need to be cut by roughly
one-quarter in perhaps 11 years — or, if the recession is
protracted and severe,
maybe even sooner.”

Siegel Bernard notes that President Trump has talked about

terminating the payroll tax the funds Social
Security and having the program funded through the general budget,
though the White House says that he only meant he wants to forgive
payroll taxes deferred under an executive action he announced in
August.

Experts warn that, while eliminating the payroll tax is
unlikely, any such change would represent a monumental shift that
could undermine Social Security. “We have a very crowded budget as
it is,” Shai Akabas, economic policy director at the Bipartisan
Policy Center, tells the Times. “And having Social Security in the
mix with everything else puts the program at risk in the
future.”

Joe Biden, meanwhile, has proposed expanding both the payroll
tax and benefits. The 12.4% tax, split between employers and
employees, currently applies to the first $137,700 in earnings.
Biden would have it also apply to earnings above $400,000 a year —
and, as Siegel Bernard notes, because the $137,700 cap is set to
rise with inflation, the tax would eventually apply to all income
up to $400,000.

“What is commendable about Biden’s plan is that he actually has
one, taking the financial challenges facing Social Security
seriously,” Richard Johnson, director of the program on retirement
policy at Urban Institute, a nonprofit think tank, told
MarketWatch recently.

An analysis published this month by Johnson and his colleagues
at the Urban Institute found that Biden’s proposals would close
about a quarter of Social Security’s long-term funding shortfall
and add about five years to the expected life of the trust funds.
The analysis also projected that Biden’s proposals would cut the
poverty rate for adult Social Security beneficiaries by more than
half over the coming decades.

Critics note that Biden’s proposals don’t factor in the impact
of the pandemic — and don’t do much to solve Social Security’s
long-term problems. “Social Security would become insolvent in 2040
instead of 2035,” Andrew Biggs of the American Enterprise Institute
wrote in
The Wall Street Journal earlier this month.
“Further tax increases would surely be demanded down the road.”

Akabas of the Bipartisan Policy Center told the Times that
action is needed now to avoid more painful changes — bigger tax
increases or cuts — down the line. “The longer we wait to fix the
problem,” he said, “the fewer people who can play a role in the
solution.”

Read more at
The New York Times,
MarketWatch or the
Urban Institute.

Quote of the Day

“No central bank wants to admit that it’s out of firepower.
Unfortunately, the U.S. Federal Reserve is very near that point.
This means America’s future prosperity depends more than ever on
the government’s spending plans — something the president and
Congress must recognize.”

– Bill Dudley, former president of the Federal Reserve
Bank of New York, writing at
Bloomberg Wednesday.

Number of the Day: $14 Billion

The 2020 elections are by far the most expensive in U.S.
history, with total spending projected to reach $14 billion, double
the previous record set in 2016 (even after adjusting for
inflation), according to estimates from the nonpartisan
Center for Responsive Politics.

“In fact, this year’s election will see more spending than the
previous two presidential election cycles combined,” the center
said Wednesday. “The massive numbers are headlined by unprecedented
spending in the presidential contest, which is expected to see $6.6
billion in total spending alone. That’s up from around $2.4 billion
in the 2016 race.”

Eight of the 10 most expensive Senate races ever are also
taking place this year.

Congratulations to Clayton
Kershaw and the Los Angeles Dodgers. Boo to

Justin Turner.

Send your tips and feedback to yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis