Trump's Social Security Magic Trick

How the GOP tax plan guts the foundation of Social Security

Before I get to my longer analysis, I wanted to start with what’s caught my eye and what I've been reading this week. I welcome feedback from the loyal WGP readers on if you like this or just want to get straight to the good stuff.

What I’m paying attention to:

• Tariffs: I’m getting tired of living through economic crises, especially one this dumb. There's plenty of analysis and commentary on the Trump Administration’s thinking and what’s happening to markets. I’ll recommend Paul Krugman’s interview with Ezra Klein, Rogé Karma’s piece in the Atlantic, and Kyla Scanlon’s Q&A post.

• Trump taxes: In the background of tariff headlines, Republicans passed a budget blueprint on Saturday—a crucial step to advancing their tax plan that would raise America’s debt by $4.6 trillion over 10 years. Fiscal conservatism at its finest.

  • On anything related to budget and tax, I turn to Bobby Kogan. There’s no one better. In one of his analyses, he calculated that 57% of the rise in the nation’s debt-to-GDP ratio since 2001 has been attributable to tax cuts. That number shoots up to 90% if you strip out one-time spending Congress did to respond to the Great Recession and COVID-19.

  • For timely rigorous analytics, I rely on the good folks at the Yale Budget Lab. Recently, they showed that when combining the GOP’s proposed tax cuts and spending cuts, the poorest 20% of Americans would lose an annual $1,125 while the richest 0.1% would gain $180,910.

  • One thing I’ll pay attention to in the weeks to come is whether Senate Republicans skirt legislative norms and rules to push this package through. I’ll have an explainer up soon on Salon to help people understand these shenanigans and the stakes.

What I’m reading:

• I recently finished Liz Pelly’s Mood Machine: The Rise of Spotify and the Costs of the Perfect Playlist. It contextualizes Spotify in the music industry and critiques many of the company’s processes. Two things in particular stood out from the book.

  • First, Spotify’s business model depends on “passive listening.” More people just want to music to be a background to their different activities, from “doing the dishes” to “chill BBQ.” We always want good music to be playing, but we never want to be actively listening. I definitely fall into this camp but hadn’t even realized my relationship with music had changed in that way.

  • Second, Spotify fills up a lot of their playlists with “fake artists,” or artists that Spotify pays to make generic songs for playlists like “lofi beats” and then generates fake bios for their Spotify profiles. By not paying “real” artists to fill out Spotify’s curated playlists, the company saves a lot of money. And because Spotify has endless data on consumer listening habits, it knows for which genres to produce its own music. Generative AI will only make this easier for them, too. It feels analogous to Amazon using data from its platform to find out which items are popular and then undercutting them with an Amazon generic brand item that magically shows up as the first suggestion on your shopping page.

• I’m almost done with and really enjoying Jesselyn Cook’s The Quiet Damage: QAnon and the Destruction of the American Family. She follows a few families, and the stories she tells are haunting. The stories will stay with you, but so will the data. E.g., “In 2021, a staggering 15 percent of Americans agreed that the government, media, and financial worlds were ‘controlled by Satan-worshipping pedophiles,’ polling found. By late 2023, that number had rocketed to 25 percent.” Not great!

Now the moment you’ve all been waiting for…

If the Republican tax plan passes as currently envisaged, our country’s debt situation will be bleak. A future President and Congress will have to make hard decisions, including hiking taxes and making significant cuts to entitlement programs like Medicare and Social Security. In Salon I wrote about why it’s disingenuous for President Trump to claim he’s a champion for Social Security when his tax plan sets the program up for long-term failure. The full op-ed is below.

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Trump’s Social Security sleight of hand: MAGA’s magic trick will make your benefits disappear

President Trump is a master showman, but an amateur magician. Look at the trick he’s trying to pull on Social Security. He warms up his audience with a grand promise—“I will not cut one penny from Social Security.” Then he riles them up: he’ll even cut their taxes, by eliminating the tax Social Security beneficiaries pay on their benefits. But it’s all a sleight of hand.

The trick is done in two parts.

The first part is what he wants you to pay attention to: the big pledge — not only to protect Social Security, but to make it even better. He won’t cut your benefits; he’ll cut your taxes. Because of how enticing this sounds, he’s hoping it will be an adequate distraction — that while today’s retirees are cheerleading for their newfound tax savings, none of us will notice part two.

To finance his plan, President Trump will loosen the spigot out of the Social Security trust funds — exacerbating the ongoing drawdown of these government accounts that hold the money all of us pay into the program. Because it’s just a slow drip, he’s counting on no one noticing. Just like a teenager taking a little bit out of his parents’ liquor bottle every weekend, praying they can’t tell the difference. It works until it doesn’t.

In about ten years’ time, the Social Security trust funds will be bled dry. When the next generation of retirees comes around, they’ll find that not only did they miss out on the tax savings the president is promising today, but they won’t even get the full benefits they’ve been promised their whole lives. That’s because while President Trump had us rapt with his bold promises, he instructed congressional Republicans to mortgage future generations to pay for trillions of dollars in tax cuts for America’s wealthiest families.

Those tax cuts will send our country’s debt spiraling, leaving a future president with few ways to replenish the trust funds. Instead, President Trump’s successor will be left with little option but to cut retirees’ checks or raise the retirement age. By then, President Trump and his billionaire pals will be enjoying the money they’ve sucked out of the system and leaving the rest of us to deal with the consequences.

It doesn’t take Benoit Blanc to see through this charade. Just follow the numbers.

Let’s start with the trust funds.

About half of Social Security beneficiaries already don’t pay a tax on their benefits because they have lower incomes. On the other hand, the top 20 percent of retirees—those making over $205,800 — pay 20 percent. This group of the richest retirees are the ones who will benefit the most from the President’s proposal, saving $7,250 per year.

Today, by law, about three-fifths of those tax revenues go into Social Security trust funds, helping to keep them solvent. By no means do they make up the bulk of the trust funds’ revenues, but, by one estimate, one of the funds would run out of money a full year earlier without these revenues. And when the trust funds run out of money, 81 million retirees, people with disabilities, and their families will only receive a fraction of what they are owed unless the president and Congress figure out a way to make up the difference.

It’s true that we’ve long known that under current policy, the trust funds are slated to run out of money in a decade. President Trump’s proposals will make them run out quicker and make it nearly impossible to fund them anew.

That’s because the president has called on Congress to extend his 2017 tax cuts, which cost $4 trillion over ten years and funnel the bulk of the savings to the wealthiest Americans. He wants to run up the tab, knowing that the bill will come due in about ten years, right around the same time the trust funds will be exhausted and when he will be long gone from office.

When that happens, a future president and Congress would normally have a choice. They could raise taxes, they could cut benefits, or both. President Trump’s tax plan will tie their hands.

It will chart America’s debt to a path of unsustainability where future policymakers will have to make drastic decisions. To start, President Trump’s successors will certainly need to hike taxes to be able to pay off our existing debt, protect our national security and respond to crises like natural disasters or a pandemic. If, on top of that, they need to shore up Social Security, they could raise taxes even further, perhaps to a level unprecedented in post-war years. But what’s more likely is they will start to slash Social Security — at the cost of retirees, future generations or both.

No magician likes a ruined trick. But if Trump’s tax bill reaches his desk and he says it will make Social Security great again, now you will know what’s really going on.