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Politics Foreign Affairs Culture Fellows Program

Why Trump Is Right about Social Security and Medicare

The popular, earned-benefit programs have strengths on the merits.

Hershey,,Pa,-,December,15,,2016:,President,Donald,Trump,Grabs
Credit: Evan El-Amin

After winning re-election 20 years ago, President George W. Bush wasted his political capital on a wild goose chase to partially privatize Social Security, an issue seldom discussed during the campaign. The more he pitched the concept during the early months of 2005, the less the public bought in. Nor could Dubya secure enough support from his enlarged majorities in both chambers of Congress to bring up the proposal for a vote.

This domestic-policy Edsel set the pace for a failed second term, including Republicans losing both houses of Congress in 2006. Yet prominent GOP voices since have remained stuck in the Bush dreamworld of “reforming” Social Security, exaggerating the projected, down-the-road funding shortfalls, as did Bush, into an existential crisis.

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Former President Donald Trump understands the political reality that the 43rd president did not: Earned-benefit programs remain popular with Middle America, especially with voters over 45 years of age, who have favored Republican presidential picks since 2012. So his White House did not mess with Social Security or Medicare. As the likely GOP nominee this year, Trump has reaffirmed his pledge to heed the GOP base on these pocketbook issues.

He may lack the electoral magic of Eisenhower, Nixon, and Reagan, but Trump stands with the masters in accepting—not relitigating—the New Deal centerpiece that served the country well until the Great Society broke from the bipartisan policy consensus. The unconventional candidate might remember that FDR borrowed the Social Security idea from his GOP cousin Theodore Roosevelt. Or how congressional Republicans dared the Democrats, during the 1938 midterms, to improve the then-fledgling program. As social historian Allan Carlson captures the drama, by criticizing the stinginess of the old-age component that had yet paid any beneficiary, the GOP picked up 80 seats.

Consequently, the 1939 Social Security amendments transformed the original setup, modeled after private insurance, and geared to the individual worker, into pay-as-you-go social insurance delivering spousal and survivor benefits to the married-parent family, elevating “the American standard” as the socioeconomic ideal. So popular were these reforms, cementing Social Security’s enduring appeal, that the 1940 GOP platform endorsed the program.

Later linked to Medicare, the sole Great Society program premised on New Deal principles of reciprocity, the socially conservative system laid the foundation of the family-benefits package wage earners still covet. As John Mueller, the Jack Kemp advisor who helped craft Reagan’s 1981 tax cuts and 1986 tax reform, contends in Redeeming Economics, pay-as-you-go benefits “provide a valuable form of retirement security that the private market cannot duplicate.”

Trump also knows that attacks on the system, from Texas’s former Senator Phil Gramm’s claim that Social Security “was doomed from the start” to Bush 43 Social Security Deputy Commissioner Andrew Biggs’s insult that retirees don't earn their benefits, worsen the party’s branding problems, in the manner of Mitt Romney’s infamous whopper demeaning half the country as “takers.” Such toxic rhetoric only gives President Biden ammo to blast Republicans and inspires progressives to lobby the White House to “go big” on enhancing benefits to beat Trump. All the while, these unforced errors kneecap Republicans from constructing a platform that delivers economic tangibles to average workers, not just investors.

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The equivalent of Democrats calling for outlawing teachers unions or turning bullish on fossil fuels, the crying wolf over Social Security is also selective, if not disingenuous. No question, Social Security drives federal spending and faces shortfalls come 2034, per the most recent trustees’ report. Yet that observation captures only half the story.

Its funding mechanisms, especially the payroll tax, have established the mostly self-financing retirement-and-disability program as more budget-bracing than budget-busting. Revenues flowing into the Social Security trust funds, including interest on the reserves, have generated surpluses for at least a generation, per the chart below. Even as baby-boom retirements have cut into those reserves, the old-age and disability funds ran combined shortfalls only in 2021 and 2022.

The same cannot be said of Medicare. Surpluses from its hospitalization-insurance component are less pronounced, lasting only through 2031. And Medicare’s supplemental medical insurance—never supported by the payroll tax—is funded mostly by general revenues covering 75 percent of costs. In the last three years, this part of Medicare required roughly $400 billion annually from the U.S. Treasury, a legitimate concern.

Yet if budget hawks were so concerned about fiscal discipline, why so little protest over the decades when Social Security surpluses were hijacked to boost federal appropriations, from Wall Street bailouts to endless foreign interventions? Moreover, as Trump’s OMB Director Russ Vought argues, budget cutting should aim first at the low-hanging fruit in the woke bureaucracies, from the State Department hosting LGBTQ+ parades abroad to Homeland Security’s promoting multiculturalism via open borders and HUD’s war on the suburbs.

The easy targets also include bigger-ticket items: means-tested, anti-poverty welfare outlays, which the Great Society placed on steroids. Having tracked these expenditures over his career, Robert Rector of the Heritage Foundation details a cornucopia of 87 assistance programs sprawled over four independent agencies and nine federal departments. Per Rector, the hemorrhaging exceeds not only the growth of Social Security and Medicare but also defense and education, reaching $841.4 billion in federal resources by 2018, before the pandemic and President Biden’s welfare spree. Using similar calculations, this writer counts the 2022 toll at more than $1.5 trillion, more than triple the public costs of Medicare.

Yet the same Republicans obsessed with entitlements popular with their own voters never declare the means-tested monstrosity “bankrupt” or a “Ponzi scheme”—even though it feeds the Democratic base, from the underclass to the grantees and public-union apparatchiks who run the overlapping programs. We’ve come a long way from President Reagan, whose budget knife carved back the Great Society, not the New Deal.

Knee-deep in the numbers, the critics of Trump’s endorsement of social insurance can’t see the macro perspective explaining why Social Security reserves are in retreat. Indeed, the crowd pushing entitlement reform is the same that cheered policy departures from the Reagan era that have devastated the U.S. manufacturing sector, a key source of American strength and wealth, not to mention stability for rank-and-file Americans, most of whom lack college degrees. 

These influencers seem unaware of how our downward spiral—from a family-wage, middle-class economy centered on producing and exporting sophisticated products toward a low-wage, service-based Hunger Games dystopia brought on by skilled-labor outsourcing, mass immigration, and the elevation of finance—has turned many former producers of government revenue (high-wage workers) into consumers of government revenue (welfare recipients).

Even their solutions for trust-fund replenishment, from upping the retirement age to adopting alternative formulas to trim COLAs for retirees, fall flat with the public. Likewise, the Trump critics aren’t weighing the imperatives of rebooting our defense-industrial base, reducing our ballooning trade deficits, or recovering the family wage, an achievement that built the American century. Nor do they offer solutions to the country’s upside-down demographics, including the decades-long retreat from marriage and anemic birthrates—inseparable indicators, Adam Smith observed in The Wealth of Nations, on which the nation’s fortunes, including trust-fund balances, rest.

If addressed, these underlying challenges would enable Republican policymakers to construct a policy agenda that would resonate with the “silent majority” to which earlier GOP presidents pledged allegiance. Rather than calling our social-insurance system busted, we should declare our political economy broken—and promise to rebuild the country around the restoration of a rising and robust middle class. Such visionary leadership would have prevented Bush 43 from squandering his presidency. And ensure that next time the GOP controls both ends of Pennsylvania Avenue, the party would have a real shot at ushering in what Karl Rove has only dreamt about: a permanent Republican majority.