Presidential candidates can't ignore Social Security

Exhaustion of disability trust fund in 2016 should force discussion of long-term financing issues

Aug 5, 2015 @ 3:47 pm

By Mary Beth Franklin

The clock is ticking for the Social Security Disability Insurance Trust Fund. Unless Congress intervenes, the trust fund will run dry in late 2016 — just about the time Americans will be electing a new president.

Without action, the 11 million people with disabilities who rely on Social Security will see their benefits cut by 20% because the portion of payroll taxes that fund those monthly payments will be insufficient to pay all of the promised benefits.

“Social Security's Disability Insurance Trust Fund now faces an urgent threat of reserve depletion requiring prompt corrective action by lawmakers if sudden reductions or interruption in the benefits payments are to be avoided,” the Social Security and Medicare trustees warned in their recently released 2015 report.

It is time for the crowded field of presidential candidates to weigh in on this important issue. And while they are at it, they may want to discuss the long-range financing problems of the entire Social Security system that includes retirement and survivor benefits for 48 million workers and their families.

Easier said than done, of course. Social Security has long been called the “third rail of politics” — touch it and you die. But politicians can't keep ignoring the fate of one of the most popular government programs in history, one that is increasingly important to retirement security as traditional pensions disappear and Americans live longer than ever.

Just ask New Jersey Governor Chris Christie. He was lambasted for dipping his toe into the icy waters of the Social Security debate during a campaign swing through New Hampshire in April.

Mr. Christie, who is trailing near the bottom of the Republican field of candidates, called for means testing Social Security by reducing benefits for future retirees with incomes over $80,000 and eliminating benefits for those with incomes topping $200,000. He also called for gradually raising the full retirement age from 67 to 69.

Although his proposed solutions may be unpopular, you have to admit that it took guts to broach such a touchy subject. Just imagine what Donald Trump, currently leading the GOP field of candidates, could do if he shifted his focus and inflammatory language from immigration to Social Security reform. It certainly would be interesting.

Earlier this year, former Florida governor Jeb Bush suggested there should be no changes in Social Security benefits for current retirees. But the one-time Republican front-runner added: “Your children and grandchildren are not going to get the benefits that they believe they are going to get.”

Back in 2013, before he threw his hat in the Republican presidential ring, Senator Ted Cruz of Texas expressed a similar sentiment. “I think it should be a bipartisan priority to strengthen Social Security and Medicare to preserve the benefits for existing seniors and to enact fundamental reform to ensure that those programs remain strong and vital for generations to come.” Oddly conciliatory words from the firebrand of the conservative Tea Party.

Kentucky Senator Rand Paul, another Tea Party darling, co-sponsored a bill in 2011 that called for increasing the Social Security full retirement age to 70 by 2032 and gradually increasing the early retirement age from 62 to 64 by 2028.

On the Democratic side, Hillary Clinton has championed raising incomes for the middle class while remaining silent on retirement security and Social Security reform. But during her 2008 presidential campaign, Ms. Clinton said if she were elected she would appoint a bipartisan commission to make recommendations for a long-term fix and would refrain from discussing specific proposals until the commission offered its recommendations.

Democratic challenger Bernie Sanders of Vermont is adamant about protecting Social Security for current and future retirees. He sponsored bills in 2011 and 2013 that would nearly double the current taxable wage base to $250,000, significantly boosting payroll contributions to finance the Social Security trust funds and eliminating most of the long-term financing problems, albeit with a very one-sided solution.

Of the 6.2% in payroll taxes paid by both workers and employers on up to $118,500 of earnings in 2015, 0.9% goes to the Disability Trust Fund; the rest goes to pay retirement and survivor benefits. An additional 1.45% of payroll taxes on all earnings funds Medicare.

One trust fund cannot borrow or receive reallocated payroll taxes from the other without congressional action. But Congress has approved reallocations 11 times in the past. Shifting one-tenth of 1% of FICA taxes to the Social Security Disability Insurance Trust Fund from the Old-Age and Survivors Insurance Trust Fund would extend the life of the disability trust fund until 2033. At the same time, it would accelerate the depletion of the OASI fund by one year, to 2033 from 2034.

But on the first day of the new Congress earlier this year, the Republican-controlled House adopted a procedural rule that forbids the House from approving any financial fix to the Social Security Disability Insurance program unless it is accompanied by broader Social Security reforms.

That means the stage is set for a Social Security showdown during a presidential election year. Don't you think the public deserves some answers from the candidates? After all, whoever wins the election probably will have to deal with the immediate Social Security disability crisis and possibly take steps to begin addressing the long-term financing of the overall program. We're listening.

(Questions about Social Security? Find the answers in my ebook.)


What do you think?

View comments

Recommended for you

Featured video


2019 concerns keeping successful advisory firm leaders up at night

These are the greatest business challenges for next year, according to InvestmentNews' Best Practices honorees.

Latest news & opinion

Some good news about female recruitment in financial advice

Each of four core advisory positions tracked in InvestmentNews' benchmarking study has seen an uptick in women entrants.

10 ETFs that are up more than 35% this year

Amid the stock market carnage, there are still some funds posting big gains.

10 biggest HSA providers rated

Morningstar rated the largest plan providers as investment and spending vehicles.

Morningstar: DOL fiduciary rule reduces inflows to mutual funds with high loads

With the measure's demise, will the SEC's advice reform sustain the momentum?

6 tax strategies for year-end planning

How to help clients maximize their wealth using specific tax strategies before the end of the year.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print