U.S. President Donald Trump (Drew Angerer/Getty Images)

Is Trump destroying Social Security and Medicare by accident — or on purpose?

Trump's payroll-tax gambit could be the dumbest thing he's ever done — unless it works. Either way, it's a disaster



Bob Cesca
August 11, 2020 11:00AM (UTC)

It's quite likely that Donald Trump was unaware that payroll taxes are how the Social Security and Medicare trust funds are bankrolled. He might also be unaware that current Social Security checks to seniors are derived from payroll taxes — not those paid into the system when today's recipients were working, but the ones being paid in, right now, by today's workers. 

Either Trump doesn't know how the programs work or he's deliberately attempting to use executive orders to kill both programs, in accordance with the decades-long conservative crusade to drown them in the bathtub, leaving current and pending retirees without the benefits they're expecting.

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One way or another, Trump may have just committed political suicide with around 80 days to go before Election Day — wrapping his stubby, sweaty paws around the electrified third rail of electoral reality. To be clear: I'm not complaining about the political suicide part. Fine by me. After all, my rule remains: Trump always makes things worse for Trump, but the awful reality is that too often the rest of us are caught in the relentless undertow from his bungling incompetence, dragged further away from the democratic republic we once knew. 

Let's rewind and start from the beginning.

At his golf resort in Bedminster, New Jersey, this past weekend, Trump signed an executive order deferring payroll taxes for working Americans for four months, from September through December. It's crucial to note that the so-called "holiday" is actually just a delay of the taxes due, meaning workers will have to pay back the full amount after the four-month holiday ends. However, Trump claims that if he wins re-election, he'll not only eliminate the payback provision, but will consider eliminating the payroll taxes entirely. 

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As our president explained to an assembly of wealthy club members who resembled the cast of "Caddyshack" on Saturday, "If victorious on Nov. 3, I plan to forgive these taxes and make permanent cuts to the payroll tax." He added, "I'm going to make them all permanent."

A senior adviser on the Trump campaign, Jenna Ellis, tweeted that Trump will "look into terminating the payroll tax permanently."

Trump claimed on Monday that his hypothetical payroll tax cuts would have "no effect on Social Security and Medicare," and that those trust funds would be reimbursed from the "general fund," meaning the money would come from federal revenues without congressional approval, which I'm pretty sure is illegal. 

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It's also germane to add that Trump thinks that the Supreme Court's DACA decision gives him the authority to create and sign his own laws, without bothering to go through Congress. It's quite likely that Attorney General Bill Barr, who's the loudest voice in support of the "unitary executive" theory since Dick Cheney retired to Wyoming, has told Trump he can do this, even though he can't. In fact, the Supreme Court will likely strike down Trump's executive order, since it spins off into the territory of appropriations and taxation, which are the exclusive constitutional purview of Congress. Of course Trump is also ignoring the rest of the court's decision on DACA, having refused to accept a single new Dreamer application since the court ordered him to, which of course means he's capable of doing it again and again.

With all that out of the way, let's talk about specifically why this is such a terrible idea.

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1. The forthcoming personal debt crisis. Again, the payroll tax holiday isn't actually a holiday. Deferring the payments to January will only sucker-punch taxpayers just when things should be ramping up again economically. Combine this deferral with pandemic-related deferrals on rent, mortgage payments and other debt, plus unsustainable credit card debt that out-of-work Americans are rapidly accumulating, and we're talking about the potential for a colossal glut of bankruptcies and worsened household debt starting in 2021. 

Unless there's no other way, workers need to ask their bosses to continue charging the existing payroll tax rates. Don't let Trump's irresponsibility, recklessness and penchant for bankruptcies force you into insolvency, too. If you can afford to ignore the holiday, ignore it and keep paying the old rates. Plus, you'll be contributing to the common good, preserving Social Security and Medicare so that it might be around when you retire, too.

2. Trump is extorting you for your vote. Did you hear? If and only if Trump is re-elected, you won't have to pay back the money from the payroll tax holiday! So you'd better vote for him or else, right? Wrong.

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Think about how this works: Trump is linking payroll tax forgiveness to the outcome of the election. If he wins, you might not have to repay the deferred taxes, he says. But if he loses … who knows? Will he forgive the taxes owed in January even if he lost the election? We should assume he won't. 

He's counting on voters taking the bait, so by the time they realize what they've done it'll be after the election and too late. The smart move is to ignore his offer. Assume it's a scam like everything else he does. (See also Trump University, the Trump Foundation and the countless Atlantic City contractors he screwed out of payment.)

In the end, either Trump or the courts will make taxpayers pay back the money. It might happen because he'll simply forget to forgive the taxes or because he won't care or because his executive order will be struck down by the courts after workers have already enjoyed all or part of the holiday. In other words, if the courts strike down the payroll tax holiday, which they probably will, you'll almost certainly have to pay back the taxes for however long the holiday lasted, irrespective of Trump's empty promises.

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3. Social Security and Medicare will die. We covered this already, but it bears repeating: If Trump wins and makes good on his promise to forgive the payroll taxes owed during the holiday, and then if he signs another executive order (thinking it's a law) making the holiday permanent, Social Security and Medicare will quickly dry up. Not only does that mean the programs won't be around when current workers retire, it will rapidly be stripped away from current retirees, creating a debt and homelessness crisis of epic proportions, chiefly affecting elderly, sick and disabled Americans.

If I were Senate Majority Leader Mitch McConnell or Sen. Todd Young of Indiana, who chairs the National Republican Senatorial Committee, I'd be sprinting up to the White House for a come-to-Jesus meeting with Trump for launching all this nonsense with just a few weeks to go before early voting begins.

4. This is all part of the plan to "starve the beast." Republicans know they can't get away with killing Social Security and Medicare outright. The political repercussions would be catastrophic. Instead, they've been practicing the "starve the beast" strategy, in which they manufacture budget shortfalls in order to pitch various cuts to the programs, including partial privatization. They pretend to feel bad about it, but they really don't. They want voters to believe they have no choice but to cut the programs, even though they have plenty of options for maintaining solvency. The best method, by the way, to preserve the programs for all time would be to eliminate the income cap. Currently, taxpayers who make more than $137,700 don't have to pay into the system on the remainder of their income above the cap. But Republicans won't support lifting it because that would amount to a tax increase on upper-income earners. Who are, you know, their people. 

Trump's payroll tax holiday is the most brutal and obvious of any "starve the beast" gambits so far. Only this time, he's potentially defunding both of these immensely popular programs in one go, hoping it's all too complicated for voters to understand — especially as it whizzes past our heads with the rest of the ceaseless Trump madness. 

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If he makes the tax holiday permanent, the deaths of Social Security and Medicare will be inevitable. When the money dries up, that's it. That's the end. If you're retired now, or if you're about to, you'd better make contingency plans because this is the real deal.

To repeat: When confronted by questions about keeping the programs solvent, Trump told reporters on Monday that he intends to reimburse the Social Security and Medicare funds from the "general fund." On the surface, that might sound like he's planning to cover the shortfall. But he's not. Appropriations from the general fund will balloon to staggering proportions, further inflating the budget deficit and national debt. As of right now, Trump has already spiked the deficit from around $500 billion in Barack Obama's final year to a record $3.7 trillion by the end of 2020, according to Congressional Budget Office estimates.

Now add to the deficit literally all the mandated payouts to the Social Security and Medicare trust funds. According to the Social Security Administration, "In 2020, about 65 million Americans will receive over one trillion dollars in Social Security benefits." If Trump has his way, that's $1 trillion pulled from the general fund every year, with no reimbursement of those revenues from tax collection, meaning that at least an additional trillion will be added to the annual deficit. And that doesn't even take a defunded Medicare trust fund into consideration.

Take a guess what'll happen when congressional Republicans see the shortfall manifesting: This will mean significant cuts to benefits or the elimination of cost-of-living adjustments or whatever other sabotage they propose. 

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So there are several possibilities here, and none of them carry good news for taxpayers. Either we'll slam face-first into a brick wall — a deferred tax bill to pay next year — or, in the worst-case scenario, Social Security and Medicare will be crushed beneath Trump's ponderous bulk, a consequence of his hyperkinetic desperation to be re-elected after presiding over and indeed precipitating the deaths of more than 160,000 Americans. 

Through his knee-jerk malevolence, Trump is steamrolling Americans with unnecessary debt, along with all of its accompanying financial hardships. And, honestly, it's no wonder. More than 62 million suckers decided to vote for a game-show host whose TV catchphrase was literally firing people from their jobs, the portend of a 11 percent unemployment rate. They elected a failed real estate developer who's carrying hundreds of millions in debt, and who couldn't make money by operating casinos, which are usually geysers of cash. Remarkably, Trump's suckers might vote yet again to have their Social Security and Medicare taken away, along with everybody else's. They can wise up now, or pay up later.


Bob Cesca

Bob Cesca is a regular contributor to Salon. He's also the host of "The Bob Cesca Show" podcast, and a weekly guest on both the "Stephanie Miller Show" and "Tell Me Everything with John Fugelsang." Follow him on Facebook and Twitter. Contribute through LaterPay to support Bob's Salon articles -- all money donated goes directly to the writer.

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