Over the last thirty years, skyrocketing inequality has threatened Social Security's survival. The wealthiest have captured an increasing share of income gains above the taxable earnings cap, while workers' wages have flat-lined. This trend has shrunk the share of national wages being taxed to fund Social Security. That's why the program's "total cost is projected to exceed its total income (including interest) in 2018 for the first time since 1982," according to Social Security's Board of Trustees.
For decades, conservatives on both sides of the aisle have tried to raid Social Security to bankroll corporate tax cuts and/or turn it into a profitable industry. Sanders's legislation pushes back on this agenda.
Social Security Under Attack
In 1976, Ronald Reagan ran for the GOP nomination on a program of "voluntary Social Security" in which workers could choose to make their own retirement investments. The proposal was essentially a privatization scheme that sought to end the universal character of Social Security by allowing the rich to opt out and starving the system of critical revenue.
As president, Reagan appointed a blue-ribbon commission headed by Alan Greenspan to address the program's future solvency. The Greenspan Commission recommended payroll tax increases, which were passed in 1983 in bipartisan fashion. The tax was particularly regressive, however, as earners in middle brackets paid a much larger share of their income than those at the top due to a low income ceiling. In a particularly audacious show of state-facilitated wealth transfer, the surplus revenue generated by Reagan's tax on working people was used to offset the costs of his extensive tax cuts for corporations and the wealthy.
Democrats followed suit. During the 1984 election, the Democratic Party strategized running against Reagan on a program of "fiscal responsibility," including Senator Paul Tsongas' A Call to Economic Arms, which painted a doomsday picture of "crushing and unsustainable debt" that, he argued, required entitlement reform and a cut in the capital gains tax to encourage long-term investment. After resigning from the primary, Tsongas joined billionaire deficit hawk Pete Peterson under the Durst debt clock in New York City to cofound a bipartisan "entitlement reform" group called the Concord Coalition.
In 1992, billionaire presidential candidate Ross Perot advocated means-testing programs like Social Security and Medicare, claiming that he could save tens of billions by cutting benefits. Bill Clinton called Perot's plan "a full-scale assault on the Social Security system, undermining the universality of the program."
But Clinton, too, had run on a program of "leaner, not meaner" government and "no more something for nothing." Clinton's acceptance speech for the Democratic Party nomination telegraphed how his "new covenant" would cut entitlements, facilitate school choice, and promote "a new approach to government...that understands that jobs must come from growth in a vibrant and vital system of free enterprise."
According to conservative economist Martin Feldstein, Clinton effectively "moved the discussion of investment-based Social Security reform away from an ideological debate about the merits of government versus private systems to the more technical issues of how to design a mixed system that includes both pay-as-you go benefits and investment-based defined contribution annuities."
The "post-partisan" austerity politics of the 1990s inside the Beltway was bolstered in supposedly grassroots groups. Pete Peterson played a leading role in founding and bankrolling youth-led astroturf groups that mixed deficit fear-mongering with downright ageism against seniors to propagandize cuts to Social Security, Medicare, and Medicaid, and ultimately, privatization.
One such group, "Lead... or Leave," put an ultimatum to lawmakers: cut the federal deficit in half over the next four years, or leave office. This gang of Wall Street youth scapegoated elderly people, claiming that when baby boomers start "gobbling up pensions and health care benefits, a shock wave will blast people from their homes, rapidly plummet millions into poverty, and threaten the economic security and financial stability of our entire nation." A torrent of conservative Gen X groups echoed this view, backed by far-right foundations, Wall Street banks, and major multinational corporations -- all of which stood to gain big from privatizing Social Security.
After George W. Bush's failed attempt to privatize Social Security in the mid 2000s, Barack Obama ran on a program to strengthen it. Two years into his presidency, however, he charged the National Commission on Fiscal Responsibility and Reform (the "Simpson-Bowles" commission) with finding ways to reduce the federal deficit and balance the budget. The commission failed to reach consensus, but its recommendations included a steep rise in the retirement age and decreased cost-of-living adjustments (COLA) -- both major pillars of austerity-minded, deficit hawk orthodoxy.
In one of the more blatant shows of the Clinton Democrats' neoliberal agenda, the Clinton Global Initiative University partnered with the Peterson Foundation in 2010 to launch a student campaign called "Up to Us," a year-long competition, judged by Simpson, Bowles, and Chelsea Clinton (!), in which students from major universities ran campaigns to "raise awareness about fiscal sustainability."
The campaign's name was derived from the neoliberal mantra of "choice" and "personal responsibility" embedded in Obama's 2009 D-Day speech: "Our history has always been the sum total of the choices made and the actions taken by each individual man and woman. It has always been up to us." In 2012, Up to Us was launched at ten major universities, but grew to include over one hundred in 2018.
Despite the failure of Simpson-Bowles, Obama used his 2014 budget to lure Republicans into a deficit reduction deal with a proposal to institute "chained-CPI," a COLA calculation that would reduce Social Security benefits. I was working for Bernie Sanders at the time when he rallied with Social Security Works and other groups outside the White House and helped deliver a petition to expand Social Security (and oppose chained-CPI) signed by some 2.5 million people. Sanders also led a coalition in Congress to pressure Obama to abandon chained-CPI, which he eventually did.
A few years later, when Donald Trump ran for president, he said that he would "do everything within my power not to touch Social Security, to leave it the way it is; to make this country rich again" (a far cry from his likening Social Security to a Ponzi scheme in 2000 and claim that "privatization would be good for all of us").
Instead of strengthening Social Security, as Trump promised, the GOP passed a $1.5 trillion tax cut for the country's wealthiest, thereby swelling the federal deficit. Senate majority leader Mitch McConnell blamed the deficit rise on "a bipartisan reluctance to tackle entitlement changes because of the popularity of those programs," openly naming Social Security, Medicare, and Medicaid.
Trump advisor Sam Clovis expressed passive support for McConnell's view at the Pete Peterson Fiscal Summit that year, saying that the administration was open to cuts in Social Security and Medicare. Koch Brother acolyte Paul Ryan, for his part, introduced a Balanced Budget Amendment in the House. And at a 2018 event sponsored by the American Legislative Exchange Council (ALEC), then-Office of Management and Budget director Mick Mulvaney indicated that Social Security cuts are going to be necessary.
Against false claims by austerity-minded Republicans and Democrats, Social Security does not add one penny to the deficit. It is self-financing by design. Roosevelt made that clear when he was devising the program: "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."
It is true that Social Security's tax base has eroded, in part because of increased income inequality and the high costs of health insurance, but also because each year the US Treasury borrows Social Security surplus revenue and spends it on other things.
Therein lies the redistributive aspect of austerity politics today: cut taxes for the rich, offset the loss in revenue by raising taxes on working families, and assure them that their tax money is being set aside for retirement. After that money is eaten up through tax cuts, defense spending, and other forms of corporate welfare, people who have worked their whole lives and want to retire with dignity are told "we can't afford it."
The Expand Social Security Act
The legislation that Bernie Sanders proposed today goes in the opposite direction of austerity politics by strengthening and expanding Social Security.
On the revenue side, it lifts the cap on payroll taxes so that the wealthy pay a more equitable share. Part of the reason why Social Security is now spending more than it takes in is because extreme income growth at the top, and stagnation at the middle and bottom, has created a situation in which the share of earnings above Social Security's tax cap has nearly doubled, from 10 percent in the late 1970s to 18 percent today.
That means that a billionaire pays the same amount into Social Security as someone who makes $132,900 a year. While people like me and most people I know pay payroll taxes on 100 percent of our incomes, ultra-wealthy figures like Jeff Bezos, who make most of their money on investments, pay only a minuscule proportion -- as little as .00028 percent -- for the same maximum benefits.
By mandating that people who make over $250,000 a year pay full Social Security taxes, including taxes on unearned income, Sanders projects that Social Security would be solvent for the next fifty years and raise enough revenue to increase benefits across the board, along with expanding them for survivors, low-income seniors, and children of people with disabilities.
It would also allow the Social Security Administration to use a more accurate cost-of-living adjustment formula, CPI-E, that factors in the spending habits specific to seniors.
Right now, more than three in five seniors depend on Social Security for most of their income. One-third rely on it for nearly all (90 percent or more) of it. Without Social Security, the poverty rate among seniors would be nearly 41 percent instead of just under 9 percent now.
"Scrapping the cap" is not a radical idea: lawmakers have raised the cap several times over the years and in 1994 eliminated it entirely for Medicare. Plus, it would only affect a small portion of the population. The Center for Economic and Policy Research has estimated that taxing income over $250,000 would only impact the top 1.5 percent of wage earners.
Sanders' legislation comes after another Social Security expansion bill introduced recently in the House by Democratic representatives John Larson, Conor Lamb, and Jahana Hayes, though their bill increases benefits by scrapping the cap a bit higher, above $400,000.
That legislation has 203 cosponsors and counting, so it has a very good chance of passing. Sanders's bill is supported by many of the presidential hopefuls in the Senate, including Cory Booker, Kirsten Gillibrand, and Elizabeth Warren.
What this means for 2020 is that the Clinton-Obama austerity politics of the not-so-distant past may have finally reached their limit. Americans are sick of having to do more with less. Billionaires and millionaires are going to have to pay up.
