President Trump pledged Aug. 8 to pursue a permanent cut to the funding of Social Security and Medicare if he is reelected in November.
The president announced the proposal while unveiling four executive orders that attempt to bypass Congress to change the taxation policy of the United States.
One of the executive orders would defer the payroll taxes that fund Social Security and Medicare from August through December for people who earn less than $104,000 annually. Paychecks would go up for the four months, but the entire amount would still be owed to the government resulting in increased taxes starting next year.
Canceling the tax permanently is beyond the power of the president, but Trump nevertheless committed to permanently defunding Social Security at the event.
“If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said at the news conference. “In other words, I’ll extend beyond the end of the year and terminate the tax.”
The position is in stark contrast to his promises during the 2016 presidential campaign.
“Every Republican wants to do a big number on Social Security, they want to do it on Medicare, they want to do it on Medicaid. And we can’t do that,” he said in April 2015. “It’s not fair to the people that have been paying in for years.”
The payroll tax funds Social Security and Medicare benefits, and it’s unclear where those programs will get funding if the taxes are deferred.
“Donald Trump’s executive order, which seeks to defer Social Security contributions, is bad enough. But his promise to ‘terminate’ FICA contributions if he is reelected is a full-on declaration of war against current and future Social Security beneficiaries,” said International President Lonnie R. Stephenson.
“Before Social Security, the poorest people in this country were the elderly. Now with pensions disappearing and inadequate 401ks the rule, Social Security is often the only income many older Americans can rely on. It’s the line between aging with dignity and spending your final years in squalor.”
Worse, said Political and Legislative Affairs Director Austin Keyser, the president sold cutting Social Security by saying it would help people harmed by the economic devastation of the badly mishandled pandemic.
“Deferring a tax for a few months is just borrowing your own money. You have to pay back in a few months anyway and it only helps you if you have a job,” Keyser said. “The folks worst hit by the economic collapse, the millions of people out of work, won’t get paychecks and see no benefit at all.”
Congress already deferred most employer payroll taxes for 2020 Coronavirus Aid, Relief, and Economic Security Act and loaned or granted billions of dollars to businesses. That bill also expanded and supplemented unemployment insurance with $600 a week and protected millions of people renting homes with federal insured mortgages from eviction. Those protections expired Aug. 1.
The four executive orders were issued after Mitch McConnell’s Senate failed to act on an extension and expansion of the CARES Act before many of the provision expired.
The Democratic-led House passed a $3 trillion relief package in June, but the Republicans in the Senate and White House split and failed to pass their own bill. The benefits expired, the Senate went into recess until September and the president pushed his plan to defund Social Security.
A second executive order waives interest and allows people to delay, not cancel, payments on student loans held by the federal government until Dec. 31.
The third is a request rather than an order for Treasury Secretary Steven Mnuchin and Housing and Urban Development Secretary Ben Carson to see if they can find any more funds to help out renters, but it promises nothing.
Finally, the president ordered a cut from $600 to $400 of the federal unemployment insurance boost, but the plan would only go into effect in states that promised to pick up a quarter off the cost, something many recession-battered states are too cash-starved to do. The executive order provides only 5 weeks of funding by diverting a $50 billion from disaster relief money at the Federal Emergency Management Agency just as hurricane season reaches its annual peak.
Democrats in the House have already threatened legal action against the White House for overstepping its constitutional authority.
Article 1 of the Constitution gives nearly complete authority over taxes and spending to Congress.
In early August, Larry Kudlow, the director of the White House National Economic Council, seemed to agree that defunding Social Security and redirecting FEMA funds without Congressional approval was unconstitutional.
“I don’t think that can be done administratively. I think that requires an act of Congress,” Kudlow said five days before the president did exactly the opposite.”
“I agree with Mr. Kudlow, but I would go further,” Stephenson said. “Not only can’t he do it, it shouldn’t be done in the first place. Retirement security is too important to play politics with.”