President Donald Trump’s vow to suspend the payroll tax for the rest of the year and permanently eliminate it if he is reelected in November would, absent additional action, result in disastrous revenue losses for the Social Security trust fund. The scheme is clearly designed to aid his bid for another term.
But Trump says millions of Americans receiving Social Security benefits shouldn’t fret because the massive budget gap created by slashing payroll taxes would somehow be offset with “tremendous growth” in the economy, which is currently in a recession and is in danger of sliding into another one because of the ongoing coronavirus pandemic.
“We’re taking it out of the general fund,” Trump told reporters at a White House news conference Wednesday when asked how he would fund Social Security. He acknowledged that would require congressional support to enact, which he currently doesn’t have and likely won’t even if reelected.
Like a homeowner trying to fix his sink and flooding his kitchen in the process, Trump’s plan would create an entirely new fiscal mess for the country on top of a public health crisis that has required Congress to pass trillions in new spending to help struggling businesses or those without a job or money to pay rent.
It would also undercut what his top aides and Republicans have been saying in response to demands from congressional Democrats for a larger stimulus package. Among other things, the two sides have been unable to agree on a top-line number for another round of fiscal relief, partly because the Trump administration and GOP lawmakers have ― after years of spending like drunken sailors ― rediscovered their concern about federal debts and deficits.
“From my standpoint, the breakdown in the talks is very good news. It’s very good news for future generations,” Sen. Ron Johnson (R-Wisc.) said this week. “I hope the talks remain broken down.”
Trump’s proposed payroll tax cut would eliminate about $350 billion to $450 billion in payroll tax revenue in 2021 alone and more in later years, according to the Center for American Progress.
The scheme also faces significant logistical challenges. Many employers may simply decide to continue withholding taxes from their employees’ paychecks absent a guarantee Congress will actually forgive deferred payments, for example.
The idea of cutting payroll taxes in order to stimulate the economy never had much support among Republicans even before Trump announced over the weekend that he was sidestepping Congress on the matter by taking executive action.
“I understand why the president would like to waive the payroll tax, but only the Congress can do that, and the executive order makes that clear, so it’s not a, not the kind of solution he would like to have, I’m sure,” Sen. Roy Blunt (R-Mo.) said this week.
Senate Finance Committee Chairman Chuck Grassley (R-Iowa), meanwhile, said he could only support making Trump’s payroll tax holiday permanent if it was coupled with larger reforms to Social Security.
“We’ve got to make sure that we keep our promises to senior citizens,” Grassley told The Hill.
Republicans are also worried that by messing with the financing of Social Security ― the infamous “third rail” of American politics ― Trump is giving Democrats an attack line on a silver platter just months away from the November election.
Appearing in public for the first time with his new running mate, Sen. Kamala Harris, presumptive Democratic presidential nominee Joe Biden on Wednesday slammed Trump over his response to the coronavirus pandemic, saying he’s “issuing executive orders and making promises that in the end will defund the Social Security system while insisting that this virus will disappear.”
Biden’s campaign also began airing an ad in the battleground state of Florida this week ― a state with a large share of elderly retirees ― attacking Trump over Social Security and his frequent golfing trips.