In can you missed it, last week Senator Mitch McConnell (R-KY) said, “It’s a bipartisan problem: unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”
That quote sent progressives everywhere into over-drive, pushing the question whether the GOP believed that Americans would accept reductions to Social Security to pay for the tax cuts for the wealthy.
While the Democrats have enjoyed a lot of attention with this meme, there is little fact behind it. There are two problems with this idea.
First, McConnell’s statement indicates that the problem is both parties, suggesting to me that there is little interest in the GOP party to reduce program pay-outs without the support of Democrats. Second, reductions to Social Security can’t pay for deficits elsewhere in the budget.
McConnell is wrong about Social Security driving the national debt. Yes, the program spends a lot of money, but it also generates a lot of money. The only way that Social Security contributes significantly to the deficit is if Americans could discontinue the cost of Social Security while continuing to collect payroll taxes. That is a stretch.
Currently, it is simply not possible for Congress to collect payroll taxes and use the resources to pay for other things.
To illustrate the problem, Congress can reduce benefits to zero for 2019, and the program will continue to collect money which would flow to the Trust Fund to be held for future beneficiaries. That money would be lent to the government on terms which have to be paid back. This may alleviate the immediate pressure of paying for the tax cuts, but that pressure comes back online within a few years.
For the 2018 year, benefits should consume all of the payroll tax revenue, nearly $40 B in general fund subsidies, and more than $80 B in interest earnings. Let’s say that the GOP cuts Social Security by $80 B, enabling the program to get by on just tax existing revenue for 2019. What happens? Over the year, the government will add $80 B in bonds to the Trust Fund. The national debt has changed by zero.
So is GOP is angling to cut benefits? Not that I can see. The issue is nearly invisible in the mid-term elections.
Even in battleground states, where millions of dollars are chasing voters on the margin, candidates can’t find 20 cents to explain their thoughts on the program’s long-term finances. For example, Josh Hawley, the GOP candidate in Missouri, says that he opposes any changes to the program for those in or approaching retirement, yet he has no details of how he would keep that commitment.
It is important to understand that Social Security has problems that are completely separate from those of the federal government. Typically, we hear that this is a longer-term problem. But the fact is that this year the program will need to dip into the reserves in order to pay full benefits. This is a serious problem, one that gets very little attention.
McConnell’s message is pretty simple, that it will take bipartisan action to deal with this serious problem, and that comment was largely used by partisans to distort the current debate.