WaPo (“As Social Security fund runs dry, some Republicans say it’s time to raise taxes“)
For decades, Washington has replayed the same fight over taming the soaring national debt: Democrats cite a need for more taxes. Republicans refuse. And anyone who suggests cutting the biggest source of spending — federal retirement benefits — gets attacked.
True. Social Security is easily the biggest line item in the federal budget, accounting for $1.38 trillion so far this fiscal year. Medicare, another retirement program, follows at $955 billion. Because we’re spending far more than we’re taking in, interest on the debt is $931 billion. Those expenditures alone account for 52 percent of our outlays—before we’ve spent a nickel on anyone under 62.*
But a coming crisis in Social Security appears to be pushing at least a few Republicans off the GOP’s long-standing pledge never to raise taxes.
This summer, Sen. Bernie Moreno (R-Ohio) joined Sen. Elizabeth Warren (D-Massachusetts) in proposing to raise the payroll tax cap so people with higher incomes pay more into the program. Now the idea is emerging as an acceptable fix among other GOP lawmakers, including Rep. Tom Cole, the influential chair of the House Appropriations Committee.
“We’ve got too many people who say, ‘Well, we have to stay within the current income level or stay at the current tax rate,’” Cole (Oklahoma) said in an interview. “I’m willing to look at the tax rate. I am willing to raise the amount of income through tax.”
Of those three, Moreno is the only one not currently eligible for full retirement benefits under the Social Security system. At 59, he’s a mere child by Senate standards.
The rare GOP concessions on taxes come as lawmakers begin to confront a Social Security shortfall so large and so imminent that the party’s traditional demand for curtailing benefits is unlikely to suffice. In just six years, millions of Social Security recipients will absorb a 22 percent cut in benefits unless lawmakers provide an immediate infusion of nearly $500 billion.
“Twenty or thirty years ago,” when the shortfall was far in the future, “you could come up with a straight-faced solution” that solved the problem entirely by cutting future benefits, said Charles Blahous, a senior research strategist at George Mason University’s Mercatus Center who served from 2010 to 2015 as the Republican public trustee for Social Security.
Now the problem is so big and urgent, Blahous said, “I don’t think you can look at it with a straight face and not do all of the above.”
I mean, we could just do what we’ve done for decades: kick the can down the road while adding to the national debt, now at $40 triiiiiiiillion dollars.
Grover Norquist, founder of Americans for Tax Reform and the longtime enforcer of Republican anti-tax orthodoxy, dismissed the crack in party discipline, arguing that Republicans should stick to demanding spending cuts. Otherwise, he said, they risk infuriating voters already angry about the high cost of living.
“When Republicans say no to tax increases, they win. When they say yes to tax increases, they lose,” Norquist said. “They don’t get spending cuts — at all. And, they get smeared in the next election.”
People love tax cuts, as long as they’re not accompanied by commensurate cuts to their benefits.
But Cole, at least, said he thinks the political blowback from Social Security benefit cuts would be far worse than a comprehensive solution that includes raising taxes.
Well, yes. Over 68.4 million Americans are currently receiving Social Security retirement benefits, and 75.7 million receive some kind of benefits from the fund.
“I love Grover. But … you’ve got to deal with Social Security,” Cole said. “And believe me, you’ll have a lot bigger problem if it goes bankrupt than you’ll have keeping it whole, because people will feel cheated.”
Yes, they will. And, please, Grover is a nut.
For years, annual tax collections exceeded the cost of benefits, allowing the program to amass a surplus known as the Social Security trust fund. As the baby boom generation retired, however, the math flipped: Social Security now pays out far more than it collects and is draining the trust fund to make up the difference.
The trust fund is projected to run dry in 2032. At that point, Social Security would have to rely solely on incoming tax collections — meaning monthly checks would shrink by $440 on average unless Congress acts, according to the Bipartisan Policy Center, a Washington think tank.
Closing the shortfall would require $459 billion in cuts or fresh revenue in 2033 alone, according to BPC — and the sum would grow larger every year.
Social Security was always a Ponzi scheme. Or, more accurately, an old age welfare system designed as an earned benefit. The first recipient, Ida May Fuller, is illustrative:
Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.
Obviously, that’s an extreme case. Most people pay in longer and don’t live that long. But nobody who got benefits in 1940 had paid in before 1937. But, somehow, FDR managed to sell the program as though the recipients had earned their checks. It was brilliant marketing that has continued to this day.
Indeed, the “trust fund” itself is a fiction. Our FICA payments go directly into the general treasury. The “trust fund” gets an IOU. It’s just that we can no longer easily pretend there’s money in it now that the Baby Boomers have mostly retired.
That relentless math persuaded Moreno, an ex-car dealership owner who rode into office with President Donald Trump’s endorsement in 2024, to break ranks with his party on tax hikes. In his proposal with Warren, Moreno calls for eliminating the payroll tax cap so highly compensated workers pay the tax on their entire income.
“Why should a middle-class nurse pay a larger share of her paycheck than a wealthy corporate lawyer?” Moreno and Warren wrote in an op-ed for the New York Times, noting that one recent poll found that 62 percent of Republicans support lifting the cap. “This is doubly unfair in an economy in which top earners’ wages, over time, have pulled far ahead of those of the average worker.”
It’s a specious argument. We cap pay-ins because we cap pay-outs. If we raise the former without a commensurate raise in the latter, we destroy the illusion that it’s an earned benefit, not a welfare program.
Removing the cap without increasing benefits for high-earning workers would close more than half the program’s shortfall, according to the Committee for a Responsible Federal Budget, a nonpartisan group focused on deficit reduction. Blahous and others have cautioned against that approach, saying it would sever the connection between contributions and benefits that makes Social Security different from — and more popular than — other social welfare programs.
Uncapping the payroll tax alone would push the top marginal federal tax rate over 50 percent, according to the Manhattan Institute, a conservative think tank.
Whether that’s the most efficient was of preserving the program is beyond my expertise. But I’ve long argued that we should stop pretending that Social Security is something other than what it is. If we’re going to tax high earners more to pay for it but continue to cap their payouts, there’s no good reason to keep up the mythology. Just do away with separate federal income tax, FICA, and Medicare taxes and have a single federal income tax that’s graduated.
But, of course, Congress critters are mostly cowards.
The historic link between contributions and benefits makes changing Social Security politically perilous. That’s why many in Congress want negotiations to be outsourced to a bipartisan commission or advisory board.
Cole has introduced one of several proposals to form such a panel. He argues that more tax revenue, including from raising the payroll tax cap, “ought to certainly be on the table” alongside adjustments that would reduce future spending, such as raising the retirement age.
The retirement age is already absurdly high. The minimum is 62, which comes at a 30 percent penalty. “Full” retirement is at 67 for those born in 1960 or later. And waiting until 70 adds roughly 25 percent to the monthly check. At that point, most people are too old to enjoy their retirement. And, of course, it’s a whole different ballgame for those whose jobs require physical labor.
A third GOP lawmaker, Rep. Lloyd K. Smucker of Pennsylvania, has also said he sees more tax revenue as part of a Social Security fix. “You’ll probably have to do something on the payroll half of the money being paid into the system,” Smucker told Roll Call last week.
Smucker said lawmakers should also consider means testing, so benefits are reduced for the wealthy while low-income retirees are protected. Smucker’s office did not respond to requests for comment.
Given that those people will have paid into the system for decades, we might call that “theft.”
Though raising taxes is unpopular among Republicans, it has long been part of bipartisan plans to solve the Social Security puzzle. In 1983, President Ronald Reagan, a Republican, and House speaker Tip O’Neill, a Democrat, saved the program from its last bout with insolvency, agreeing to a mix of solutions that included increasing payroll taxes and gradually raising the retirement age.
They did, indeed.
In 2005, the late Sen. Lindsey Graham (R-South Carolina) argued for raising the payroll cap and trimming benefits. Weeks later, President George W. Bush said he was open to a “variety of options,” though his plan to curtail future benefits for all but low-income retirees and divert some tax dollars to new private retirement accounts was dismissed by Congress.
And in 2010, several Republicans on a commission formed by President Barack Obama voted in favor of a debt-reduction plan that included raising the payroll cap, raising the retirement age to 69 and trimming benefits for wealthy retirees. The plan offered by the so-called Bowles-Simpson commission never received a vote in Congress.
It was a mercy killing. There’s no way that passes.
Sen. Mike Crapo (R-Idaho) was among the commission’s yes votes. Crapo now serves as chairman of the powerful Senate Finance Committee, which has jurisdiction over both taxes and Social Security.
At a committee hearing last month, Crapo said the Bowles-Simpson plan “has informed subsequent Social Security solvency discussions.” His office did not respond to questions about his current position on tax hikes.
They got away with raising the retirement age from 65 to 67 by making it take effect two decades later. There’s an argument to be made that 69 in 2046 is younger than 67 was in 1983. But, even as someone closing in on 61, 69 still seems too long to be forced to work.
Another hallmark of Social Security reform has been deep involvement by the White House. Cole said he has urged Trump to take on the hard work of fixing the program, calling it a potential “crowning achievement.” Since Trump is not running for office again, he could “do it with no political risk,” Cole said, adding, “I think he’ll get enormous political credit for it.”
But while Trump has warned Republicans not to cut “a single penny from Medicare or Social Security,” he has not said how he would raise the vast sums needed to bolster the programs’ deteriorating finances.
Obviously, the answer is tariffs. Because other countries pay those.
*Okay, that’s a bit of an exaggeration. A little under 14% of Social Security expenditures go to disability and survivor benefits, although some unspecified portion of that is for people aged 62-65.
