It is hard to overstate what rests on the outcome of the 2024 election. Democracy probably; reproductive rights certainly. Also at stake is the well-being of the US economy, especially whether Americans can retire or must work until they drop.

Before Social Security, seniors depended on their families and their savings. Those lacking adequate support from these sources relied on charity or kept working if they were physically able to do so. Social Security made a dignified retirement possible, as two numbers make clear: without Social Security, the poverty rate for seniors would have been 40% in 2022, rather than 11%.

President Franklin D. Roosevelt started Social Security during the Great Depression. The program provides retirement benefits that rise annually with inflation and is funded by payroll taxes on wages.

From the outset, Republicans attacked Social Security as a socialist plot. More recently they have spread fears of its impending bankruptcy, claiming that unless something is done retirees will get only 80% of their promised benefits in 10 years. To “save” Social Security, they propose cutting benefits by around 20%. To me, this so-called solution looks suspiciously like the problem.

Donald Trump has frequently voiced concern about Social Security. During a March 2024 interview on CNBC he proclaimed “there’s a lot you can do in terms of entitlements, in terms of cutting”. At the 2020 World Economic Forum in Davos, he suggested program cuts in a second Trump Presidency. As President, his annual budget proposals to Congress all included cuts in Social Security benefits. His 2000 book, The America We Deserve, went so far as to call Social Security “a Ponzi scheme”.

Meanwhile, Congressional Republicans refuse to consider raising taxes. They will accept only reduced benefits. Last fall, the House Republican Study Committee (a caucus of 176 House members) proposed sharp cuts to Social Security, including raising the full retirement age from 67 to 69 by 2033, effectively a 15% cut in Social Security payments, with reductions for new retirees beginning 3 years from now.

We have seen this movie before. In 2005, President George H. Bush sought to partially privatize Social Security. Facing overwhelming resistance, he quickly abandoned the idea. Ronald Reagan proposed large cuts to Social Security after winning the 1980 Presidential election. Encountering strong opposition, he formed a commission headed by Alan Greenspan to make recommendations that would keep Social Security solvent for 75 years. The resulting 1983 reform bill made four main changes to Social Security. Three reduced benefits surreptitiously.

First, the age to collect full retirement benefits was gradually raised from 65 (in 1983) to 67 (in 2027). Each year the retirement age increases, benefits (for new retirees) fall 7%-8%. This reduced benefits by 15%.

Second, Social Security benefits were taxed for the first time in 1984. Single individuals making over $25,000 were taxed on half of their Social Security benefits and those with income exceeding $34,000 were taxed on 85% of their benefits. The income limits for married couples were $32,000 and $44,000, respectively. Originally, only 10% of recipients had their Social Security benefits taxed. Because these income limits don’t increase with inflation, today more than 55% of Social Security recipients are taxed on their benefits. With time, nearly everyone will be.

Third, the Social Security tax rate was slowly increased from 10.6% to 12.4% between 1984 and 1990 (with half paid by individuals and half by companies). This built a fund to support the baby boom generation in retirement and keep the system viable through 2060 (or so it was thought).

Finally, prior to 1983 it was up to Congress to decide how much to raise Social Security benefits each year. The 1983 reforms limited these increases to recent inflation. Retirees, though, face a higher inflation rate because they spend more income on healthcare and pharmaceuticals, whose prices have increased more than most other goods.

Despite adopting most of the Greenspan Commission recommendations, Social Security still faces financial problems. By 2034 the program will be able to pay only 80% of what it promised to retirees. What went wrong?

Two things are mainly to blame.

First, birth rates began falling in the 1970s, and then plummeted starting in 2008 as a result of the Great Recession. President Trump’s tough immigration policies compounded this problem by keeping younger people, who would be paying Social Security taxes for many decades, out of the country.

These demographic changes resulted in fewer workers supporting each retiree. From 3 workers per retiree between 1980 and 2010, only 2 workers will support each retiree by 2030. Since taxes on current workers provide the benefits to retirees, either Social Security taxes must go up, and promised benefits must go down, or other revenue sources must be found.

A second change adversely affecting Social Security is rising income inequality since 1980. This impacts Social Security in two ways. In 2024 only the first $168,600 of wage income (a figure that increases with inflation each year) is subject to Social Security taxes. The Greenspan Commission recommended that 90% of wages and salaries always be subject to Social Security taxes– the actual figure at the time. Congress rejected this recommendation, which would impact only high-income individuals. Today only 80% of wages and salaries are taxed by Social Security, resulting in considerably less revenue.

Furthermore, wages have stagnated while profit and interest-related income has grown. Since 2000 the wage share of total income has fallen from 64% to 58%, providing less tax revenue to Social Security. Some wage income has been redefined by the government as non-wage income. For example, hedge fund managers receive “carried interest”, resulting in lower income taxes and no Social Security taxes. In addition, wealthy individuals have chosen less wage income to avoid taxes. Jeff Bezos, the founder of Amazon, received a salary of only $82,000 as Amazon CEO in 2019 but made several billion dollars from his holdings of Amazon stock. Social Security taxed only his comparatively meager salary. His capital gains are subject to income taxation if Bezos sells any stock. They are not subject to Social Security taxes. Likewise, if Amazon paid dividends (currently they do not), they would not be taxed by Social Security.

The good news is that there are some relatively simple fixes.

Nearly 90% of Americans think Social Security benefits should be increased rather than cut, and 75% prefer raising the tax cap to cutting benefits. When running for President in 2020, Joe Biden promised he would not increase taxes for anyone making less than $400,000. If wages above $400,000 were subject to the payroll tax, 60% of the projected Social Security deficit over the next 75 years would disappear.

Another 28% would be eliminated by raising the Social Security tax rate by 1 percentage point (half on individuals and half on firms). To keep Biden’s promise, this could apply only to people in families making more than $400,000. Subjecting non-wage income to Social Security taxes would close the rest of the gap and then some– opening the door to raising Social Security benefits, and phasing out the tax on these benefits for low-income and middle-class individuals, or both.   

Going further, there is no reason payroll taxes should be the only revenue source for Social Security. President Roosevelt thought that having payroll taxes fund Social Security benefits would help his program get through Congress and protect it from reactionary politicians in the future. While this helped Social Security in its infancy, the arrangement seems unnecessary today. General tax revenues and borrowed money can fund benefits. The income taxes imposed on Social Security benefits already do this.

It would be surprising if Trump supported any of these solutions in a second term as President. More likely, he would try to replace it, as he did with the Affordable Care Act in 2017. That effort failed thanks to Senator John McCain (R-AZ). Unfortunately, there may be no Republican Senator next year willing to provide a thumbs down and bury any plan to reduce Social Security benefits. This responsibility now falls on the shoulders of voters.

Steven Pressman is a part-time professor of economics at the New School for Social Research, professor emeritus of economics and finance at Monmouth University, and author of Fifty Major Economists (Routledge, 2013)