I’m an Economist: Here’s Why Social Security’s Future Could Be Determined by Whether Trump or Harris Wins the Election
As the race for president heats up, the future of Social Security is once again under the microscope. Although former President Donald Trump and current Vice President Kamala Harris have differing visions for Social Security, there seems to at least be consensus on both sides that the status quo won’t work.
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“As the baby boomer population ages, there will be many more retirees withdrawing funds from Social Security per non-retiree who is still paying payroll taxes into the program,” said Ayeh Bandeh-Ahmadi, an economist who’s worked for the U.S. Treasury Department and is now the founder and CEO at Volascope Labs. “With the Social Security program only able to cover 75% of the entitlements it is committed to pay beginning in 2035, something will have to give.”
How that takes shape could depend on who gets elected, although the winner of the Trump vs. Harris race isn’t the only factor that will affect how the Social Security shortfall gets addressed.
“Realistically speaking, no president can set Social Security policy alone. The laws that govern the Social Security program are primarily set by Congress,” explained Bandeh-Ahmadi.
With the odds currently favoring a divided Congress, that could limit what either Trump or Harris could accomplish. Still, their visions for the future of Social Security vary significantly, so the changes they might try to pass through a divided Congress could be very different.
Here’s what could happen if each candidate makes the Social Security changes they’d like, according to Bandeh-Ahmadi. You can also check out another expert’s prediction if Harris wins the election here.
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Trump’s Vision for Social Security
In some sense, Trump’s comments about the future of Social Security have been contradictory. But in general, he has shown interest in altering the current structure.
For example, he campaigned in 2016 to protect Social Security, but during the pandemic he signed an executive order that allowed for the deferral of employee portions of payroll taxes. This campaign cycle, he has suggested getting rid of the payroll tax that helps fund Social Security altogether, as Reuters reported.
“While this move would result in higher take-home pay for workers, it would also severely underfund or eliminate the Social Security system, reducing the entitlements it can afford to pay out,” noted Bandeh-Ahmadi.
As for what actually might happen under another Trump presidency, there are several directions the program could go, considering his past comments.
“A Trump administration could hew to its 2016 promises or, in an effort to increase budgets for other administration priorities [such as making the Tax Cuts and Jobs Act permanent], it could try to reduce the entitlement benefits future retirees are owed. Such a policy could potentially decrease benefit amounts or raise the retirement age,” said Bandeh-Ahmadi.
“Additionally, Trump has shown interest in privatizing Social Security, with the stated goal of reducing its administrative overhead. This idea is expected to face significant opposition and is unlikely to be enacted; however Trump could use his platform to build more support for market-based alternatives to public Social Security,” they added.
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Harris’s Vision for Social Security
In contrast to Trump’s potential reforms like eliminating the payroll tax that currently funds Social Security, Harris has called for expanding Social Security and increasing funding for the program.
“Kamala Harris advocates for increasing Social Security benefits, particularly for low-income workers, widows, and individuals with disabilities,” noted Bandeh-Ahmadi.
To do so, the Social Security program likely needs more revenue. One way that could take shape under a Harris administration is through tax reform.
“She has proposed increasing taxes on high earners, households making over $400,000 annually. This could involve lifting the cap on taxable income for Social Security contributions which is set at around $168,600 annually. This approach aims to strengthen the program’s financial footing while keeping campaign promises to not raise taxes on the middle class and provide greater support to those in need,” said Bandeh-Ahmadi.
While raising the cap on taxable income for Social Security could create a situation that increases payroll taxes for those earning less than $400,000, it’s possible that Harris could balance this with tax reform elsewhere. But by specifically raising revenue via the payroll tax that funds Social Security, that could help strengthen the program.
“Typically when Presidential candidates promise not to raise taxes on certain segments of the population, they might still increase one tax but offset it elsewhere. Harris could put in place a surtax on those earning $400,000+ or could raise the cap while offsetting the increased tax burden for those making $168,600+ who fall under the $400,000 households limit with credits or lower taxes elsewhere,” explained Bandeh-Ahmadi.
Change Isn’t Guaranteed
Although Social Security will likely continue to be a talking point over the remaining months of this election cycle, that doesn’t mean that either Trump or Harris would actually change much, if anything, if elected.
“It’s very possible either winning administration doesn’t touch Social Security and kicks the can down the road,” said Bandeh-Ahmadi.
That said, one way that the President could have a strong effect on Social Security is by appointing a Commissioner of the Social Security Administration who aligns with their vision for the future of Social Security.
Given that this position requires Senate confirmation, “with Donald Trump more likely to have his party control the Senate, he might be able to get away with nominating a more activist Commissioner who supports his policies than Kamala Harris could,” said Bandeh-Ahmadi.
“As head of the Social Security Administration, the Commissioner influences how existing laws are interpreted and implemented, which could affect benefit calculations, eligibility criteria, and program administration. They also have oversight on claims processing times, customer service, and payouts of benefits as well as public messaging and Congressional testimony on the program,” she explained.
“A Trump appointee might promote private retirement accounts and other market-based retirement programs or cutting agency staff. Given public support for Social Security, including among Trump’s base, it may not be prudent for him to cut back on staffing so much that customer support complaints become a problem,” noted Bandeh-Ahmadi.
In contrast, “a Harris appointee would likely seek to maintain a higher level of funding for the Social Security Administration to ensure the long-term solvency of Social Security trust funds,” they added.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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