Just when you think Donald Trump has reached the limits of his ability to leave a jaded public dumbfounded, he comes up with a new angle. His vow to “terminate” the payroll tax that funds Social Security and Medicare is a reminder there are still those who believe there is no place in government for programs that seek to help individuals meet their basic needs (or to implement measures to keep the public safe from pandemics, as State Representative Jim Cox opined last week). And right now, one of those true believers occupies the White House.
Trump’s proposal for a payroll tax holiday is bad policy both for economic recovery and the future of Social Security and Medicare, as I wrote about just a few weeks ago.
But the call to “terminate” the payroll tax is a threat to the very existence of our retirement programs. It’s not the first time these programs have been threatened. The history of Social Security and Medicare shows there was determined opposition to these programs as they came into existence – opposition that still festers today.
Neither program would have been established without an overwhelming Democratic majority in Congress and the support of a Democratic President with a strong mandate. Social Security was created after the 1934 election cemented support for Franklin Roosevelt’s New Deal. In the early 1960s Ronald Reagan joined the American Medical Association to fight against Medicare and Congressional Republicans blocked its passage until the 1964 election resulted in a landslide for Democrats.
Social Security addressed a fundamental flaw in society – many older people did not have the resources to live above the poverty line. The problem was exacerbated by the Great Depression, when families struggling to feed themselves couldn’t afford to care for older parents. Advances in hygiene and mobility played a part too – more people were living to an older age and internal migration meant children often no longer lived nearby, meaning those no longer working had to fend for themselves.
Societal advances in the post-WWII era increased longevity and mobility even more. As a result, Medicare was created as health care became unaffordable and unavailable for older Americans.
The foundation of both Social Security and Medicare is the Federal Insurance Contributions Act, which you see as FICA on your paystub and is commonly known as the payroll tax. It is separate from the federal income tax and is intended to exclusively fund Social Security and Medicare. Generally, every employee in the United States who has paid into the system for 10 years is eligible for benefits.
For the monied class, however, the system reeks of income redistribution. Some in the 1930s labeled Social Security as an example of communism creeping into American society. Medicare was called the beginning of socialized medicine.
Opponents missed something in their doom and gloom messages, however – the programs actually worked and became wildly popular with Americans. The result was those who opposed them had to take a different tack – professing support while working behind the scenes to undermine them.
It’s been easier to do with Medicare because of the dramatic increases in the cost of healthcare and the compromise made at Medicare’s creation that the program would only pay 80 percent of healthcare costs. This allowed private insurers a foot in the door of Medicare and they’ve worked to continue to pry it open. The heart of the dispute between UPMC and Highmark that roiled Western Pennsylvania over the past decade was about these private insurers’ access to Medicare recipients.
Social Security is a harder nut to crack for its opponents. Trump’s focus on the payroll tax is his approach. He feels emphasizing the word “tax” and allowing Americans to believe its elimination will give them more money in their pockets without any consequences is a winning combination. His claim Social Security and Medicare will continue to be “fully financed” is the kind of convenient lie he so easily tells about most of his policies.
My crystal ball says the next step in the Trump approach will be the claim that everyone now getting Social Security will continue to receive it, but he has a plan for a better system for younger people because he knows Social Security won’t be around for them when they retire. Of course, Trump and his wealthy allies see a way to make short-term financial gains from this sort of scheme. As far as the future retirement needs of Americans? The plan will come out – right after his health care plan, his infrastructure plan, and his plan to make Mexico pay for his wall.