Where has your Social Security gone?

Social Security “Reform” Over the Last 25 Years:
• November 5th, 1993: President Bill Clinton, by Executive Order #12878, created the Bipartisan Commission on Entitlement Reform (the Danforth Commission) to evaluate entitlement programs – specifically Social Security and Medicare. The Commission never reached consensus and couldn’t get all members to agree on even an Interim Report. Subsets of the commission members made their own proposals. None gained any traction, nor action. See: http://www.presidency.ucsb.edu/ws/index.php?pid=61571
• February 5, 2005: President George W. Bush made a reform recommendation to add personal accounts and change the COLA. These proposals triggered great criticism, and no action was taken. See: https://georgewbush-whitehouse.archives.gov/infocus/social-security/ See also: https://georgewbush-whitehouse.archives.gov/news/releases/2005/04/200504…
• April 27, 2010: The bipartisan National Commission on Fiscal Responsibility and Reform (often called Simpson-Bowles) met to recommend fiscal reform, including recommendations to reform Social Security. Despite widespread popular support, the report failed to get enough support to send it to Congress for approval.
• June 1, 2016: President Barack Obama, nearing the end of this second term, reminded us that Social Security’s finances needed strengthening. “We should be strengthening Social Security… it’s time we finally made Social Security more generous and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.” No proposal was ever made. See: https://obamawhitehouse.archives.gov/the-press-office/2016/06/01/remarks…
• October 23, 2017, GAO report echoes President Obama: “… (we) better ensure a secure and adequate retirement, with dignity, for all.” But, it offers no plan of action other than another committee.

Back on March 25, 2025, I wrote the following proposal – a reasonable, intergenerationally-savvy solution to ensure Social Security became sustainable indefinitely. I have been pitching this for over a decade – no takers because Congress would have to admit that they intentionally promised more than they were willing to tax, to buy votes today, and send the bill to those too young to vote, and generations yet unborn. Every time you ask for a solution, I will post this:

“…  I have written more than once on how to fix Social Security. The main components are:

• Change the entitlement into a contract,
• Freeze the current program, such that Congress cannot amend it, up or down, in the future,
• Distribute worker contributions first, tax free,
• Change the death benefit so that workers or their survivors will, at a minimum, receive a refund of their contributions,
• Congress to come clean and confirm to all Americans, those who are paying FICA today and those who are receiving benefits, and those who are not currently employed of all ages, that they have lied to Americans for 90 years, and have consistently promised more than they are willing to fund,
• Congress to confirm to all Americans that they have borrowed the Social Security assets by investing them in treasury securities and using those monies to fund other aspects of the federal government – enabling the federal government to spend more than it was willing to tax.
• Require the Social Security Administration to calculate just how much each worker should have paid (and projecting taxes for all lives in being) that would have made the system sustainable for 1, 2, 5, 10, 20, 25, 50, 75 years and all lives in being,
• Confirm that amount to everyone – regardless of whether they are working or not, receiving benefits, etc.
• Give each individual choices (increased taxes or reductions in benefits, or combinations) on how they are going to individually pay their due, converted into individual elections, loaded for anti-selection, then
• True up the price tags and repeat that process once each year, allowing everyone to change their choice.

Outcome: Every worker knows what they did pay, and what they should have paid in FICA taxes. Every worker knows their own shortfall and knows what they need to contribute to make the system indefinitely sustainable – without adding disproportionate burdens to future generations.

Else, all you have is a variant of a Ponzi scheme – “don’t tax you, don’t tax me, tax that guy behind the tree.”

The Idiot Trump – What Would I Advise Him to Do?

What will the idiot Trump do? I believe he will kick that can down the road, just as Bill Clinton, George W. Bush, Barack Obama, Donald Trump 1, and Joe Biden did.

He and Biden both campaigned in 2023 confirming that they would not take action to solve the challenge. See: https://www.wsj.com/opinion/the-biden-trump-plan-to-cut-social-security-mccarthy-debt-ceiling-payroll-tax-automatic-trust-fund-6a6c7586 Excerpt: “Doing nothing won’t protect beneficiaries. It’ll subject them to automatic 23% cuts in 10 years. … Joe Biden and Donald Trump agree on one thing. “I guarantee you I will protect Social Security and Medicare without any change. Guaranteed,” Mr. Biden said in March. Mr. Trump has said: “I will do everything within my power not to touch Social Security, to leave it the way it is.” … The Biden-Trump position may sound like a pledge to protect Social Security, but it isn’t. The law “without any change” requires a huge benefit cut in 10 years. …:”

Assuming Trump doesn’t change his position and that he wants to avoid all blame, and doesn’t want to piss off voters, he can achieve one last “win,” and either garner 60 votes in the Senate or blame Social Security trust fund exhaustion on Democrats.

Here is how:

After the Republican convention in 2028, after an individual has been nominated to be the Republican candidate for president, but before the 10/1/28 – 9/30/29 budget is approved, he should hold up the budget and promise to veto any budget or continuing resolution unless Congress passes his Social Security changes:

• For 2029 and future years, cap the FICA wage base at $100,000, so Trump the idiot can take credit for “cutting” benefits to high income Americans – returning the Social Security system, over decades to come, to a base level of benefits,
• Flip cafeteria plan Section 125 pre-tax employee contributions to an after-tax basis for FICA and FICA-Med, same tax treatment that was part of the 1983 changes for 401k plans. Subjecting worker pre-tax cafeteria plan contributions to FICA and FICA-Med taxes would raise $525 Billion dollars over the 10 year budget window, which is .12% of GDP and would fill 10% of the funding gap.
• For 2029 and future years, raise the FICA tax rate from 12.4% to 16.4%, but allocate the entire 4% increase to employers – so worker contributions remain unchanged at 6.2% of FICA wages. Increasing the payroll tax by 1% raises $601 Billion dollars over the 10 year budget window, .31% of GDP, and is estimated to fill 26% of the funding gap. So, 4% would fill the gap when combined with the cafeteria plan change, even given the deleterious impact on employment from the increased tax burden.

The Democrats would be hard pressed to vote against an increase in “corporate” taxes.

Both Republicans and Democrats would seize the change in cafeteria plan taxation, as it would treat cafeteria plan pre-tax contributions the same as employee pre-tax deferrals to 401k and 403b plans.

Workers would see their FICA tax rate unchanged, and, while the tax treatment of cafeteria plan pre-tax contributions would change, because it occurs on the first paycheck of 2029, when a variety of other changes typically take effect, they would not likely notice the change. For example, once upon a time we changed the taxation of parking fees from after-tax to pre-tax on the first payroll of a new year, and I only got a handful of questions wondering: “Why did my paycheck increase?”

The cap on FICA-wages would be phased in over the next 50+ years, so gradual that no one would know the impact on their benefit.

LikeLike