What Do Biden and Trump Have Against the Young With Social Security?

Do President Biden and former President Trump hate young Americans?

It’s a fair question when one examines their stances on Social Security.

The social security trust fund will be exhausted in 2034. When that happens, benefits paid to retired persons will be limited to the amount collected from the taxes on workers — unless something changes, monthly Social Security checks could decrease by 25%. 

The exhaustion of the trust fund has two long-term causes: people are living longer and there has been a decline in fertility. The combination of extended lives and reduced fertility has sharply decreased the number of current tax paying workers per Social Security beneficiary. In 1960, there were 5.1 workers per beneficiary; in 2023, there are only 2.7.

Since it is unlikely that there will be a shortening of life expectancies or an increase in fertility, there are only three options to preserve the Social Security system: reduce the benefits for future retirees, increase the Social Security tax (FICA) on wage earners, or transfer funds from other taxes to the Social Security trust fund.

First, the Social Security benefits to future retirees could be reduced in two ways. The normal retirement age (NRA), when a retiree becomes eligible for full benefits, is currently 67 years. If the NRA were raised to 69 years and then increased by one month a year thereafter, it would close almost 38% of the gap between tax receipts and expenditures over the next 75 years.

Another possibility would be to reduce the monthly Social Security payments. The cost-of-living adjustment (COLA) of social security tends to exaggerate the true increase in prices. Reducing future COLA increases to reflect the true level of inflation would reduce the gap by about 29%.

Second, the gap could be closed by increasing the FICA tax paid by workers or by increasing the maximum income subject to the tax. The current combined employee and employer tax is 12.4% (11.2% for Social Security and 1.06% for disability insurance). This is a first-dollar tax; even those earning only minimum wage must pay FICA. If this tax were gradually increased until it reached 14.4%, it would reduce the gap by 44%.

Or, if the current ceiling on taxable income were removed but retirees would receive benefit credit for earnings above the current ceiling, this would close 58% of the gap.

The third and final option would be to use income tax receipts to close the gap. The required transfer from the U.S. Treasury would be more than $400 billion in 2032 alone and an estimated $22 trillion over the next 75 years. These taxes would be paid mostly by wage earners and would gradually change Social Security from being a retirement program to a welfare program.

Previous efforts to fix Social Security sought intergenerational equity by reducing benefits to retirees — by raising the NRA — and increasing the FICA tax on workers. However, as the 2024 presidential election heats up, both President Biden and former President Trump have stated unambiguously that none of the cost of saving the Social Security system should be paid by current or future retirees.

This means that younger wage earners would bear the entire cost of adjustment.

To close the gap would require an increase in the FICA tax to 16%. The average worker would face a tax increase — by my calculation — of about $2,200 a year. In addition to the direct effect on family budgets, this tax increase could be expected to reduce employment, education achievement, fertility rates, as well as reduce the rate of small business formation. All these results would reduce the rate of economic growth.

It is argued that it is better for younger wage earners to bear the burden of preserving Social Security because many elderly persons live in poverty. However, while the elderly used to be disproportionally poor, this is no longer true. Since the 1960s, the percentage of persons older than 65 years who are living in poverty has declined by over two-thirds. As a result, the percentage of elderly living in poverty is 10.3%, which is less than the poverty rate for people 18-64 years and substantially less than the 16.9% poverty rate for children.

If forcing wage earners to bear all the burden of preserving Social Security is questionable economics, it is great politics. Not only do a greater proportion of Americans aged 65 years and older vote — 74% in 2020 — but surveys show that maintaining solvency of Social Security is one of the top issues for these voters. Younger Americans vote less often — only 57% of those aged 18-34 years voted. And they have a wider range of concerns.

Regardless of the effects on the economy or intergenerational equity, it should not be surprising that Biden and Trump intend to impose the burden of preserving the Social Security system solely on wage earners. This policy gains more votes from the elderly than are lost from the young.

President Biden and former President Trump don’t hate the young, they are just willing to sacrifice the young’s interests to get elected.

Frank Gunter is a professor of economics at Lehigh University. The views presented are the author’s and do not represent those of Lehigh University’s College of Business.