On the menu today: Both Donald Trump and Joe Biden take a moment to offer ludicrously unrealistic proposals about Social Security and Medicare, the disappearance of functional congressional majorities, and indicators that large swaths of the world just tune out what the president says on any given day.
Washington’s Jaw-Dropping Denial about Money
Yesterday, during his press briefing at the White House, President Trump again pitched his proposal to “terminate the payroll tax” permanently.
The term “payroll taxes” probably misleads some people, as they are considered separate from your income taxes, despite the fact that half of them comes out of your paycheck. You and your employer each pay 6.2 percent of your income to pay for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners. In fiscal year 2019, Americans paid $1.2 trillion, which was almost 36 percent of all federal revenues.
By 2035, the revenue from payroll taxes going into Social Security will not be enough to cover what is needed to go out to the elderly. The money that goes into Medicare is split into two parts — the Part A trust fund, which pays for hospital and other inpatient care, and Part B, which covers doctors’ and other providers’ fees, and is not covered by payroll taxes. Part B is mostly covered by general non-payroll tax revenues and premiums paid by beneficiaries.
In April, the board of Trustees for Medicare declared that Part A is on pace to run out of money in 2026. But that was before the full scale of the pandemic-driven economic decline became clear, and some analysts think, given the sudden and lingering drop in taxes being paid, Part A will need more money going out than revenue coming in perhaps as early as 2022 or 2023.
Whoever wins in November will have to deal with this. There is not much more road to kick the can down.
Joe Biden wants to lower the age of eligibility to Medicare from 65 to 60. Whether or not you think this is a good idea, adding more beneficiaries to Medicare would increase the expenditures. Some supporters of the idea argue that those from 60 to 64 represent the oldest and often most expensive people covered by private insurance, but would be the youngest and among the healthiest under Medicare, so the cost increase wouldn’t be that high. But there’s no way to add millions of people to a government-financed system of health care and not increase expenditures by a significant amount. And the consequences for everyone else in private insurance might not be so appealing. A RAND study from last year concluded, “contrary to expectations, the authors find that when 50-to-64-year-olds move out of the individual market, premiums for individual market plans increase. When older adults leave the market, insurers are left with a smaller pool of younger, less healthy, and relatively expensive people given their age, leading to higher premiums.”
President Trump said yesterday that if reelected, he would eliminate the payroll tax entirely and have those programs maintained by general tax revenues. The U.S. would eliminate its current way of paying for Social Security and Medicare — again, more than a third of all federal revenue — and just use the remaining “normal” tax revenue to pay for it.
You probably recognized the flaw here. The annual deficit for this year — boosted by huge expenditures to help those out of work because of the pandemic, and much lower tax revenues than expected — is projected to reach at least $3.7 trillion. In the early years of Barack Obama’s presidency, Congressional Republicans and Tea Party activists believed that it was an abhorrent scandal that the United States had an annual deficit above $1 trillion per year. The U.S. came close to that threshold in 2019, will surpass it this year, and is expected to surpass it next year.
Asked about it yesterday, Trump insisted the country could manage the elimination of more than a third of current tax revenue because the country is “going to have tremendous growth.”
Could Trump Muster a Congressional Majority for Anything These Days?
By any measure, the U.S. president proposing the complete and permanent elimination of all payroll taxes that fund Social Security and Medicare is a surprising proposal — and probably also described in various quarters as “radical,” “shocking,” “profound,” and “insane.”
You will notice that the stock markets did not go nuts, up or down, in response to President Trump’s statement. Few congressional Democrats rushed to the cameras to denounce the proposal, and congressional Republicans did not quickly issue statements touting it. No member of Congress is writing up the legislation or co-sponsoring it. No committee chairman is pledging to hold hearings.
The world didn’t react much to Trump making this proposal from the White House podium because I suspect almost no one in the world thinks this proposal will ever become reality. Only a limited number of people think Trump will win reelection, and even fewer think Trump would have a like-minded majority in the House of Representatives. President Trump and House speaker Nancy Pelosi have not spoken for nearly ten months. There is no indication that Trump can woo or win over any faction of congressional Democrats; only one House Democrat voted against his impeachment. Congressional Republicans rarely openly defy Trump, but increasingly simply ignore him when he makes a proposal they don’t like — including calls to cut payroll taxes. They have less reason to fear him; a presidential endorsement doesn’t determine the winner in GOP House primaries anymore.
Trump wants ever-expanding executive powers, exploring the possibility of unilaterally making changes to the tax code, in part because he has zero ability to get Congress to do what he wants.
A change as sweeping as permanently eliminating the payroll tax would require months of work, and persistent and consistent messaging. Think back to the passage of Obamacare, which took from Obama’s inauguration to March 2010 — and required all kinds of arm-twisting of Congress, byzantine special carve-outs and backroom deals, a completely unified Democratic majority and a willingness to lose seats in the midterms over the legislation. And as the architect of the law Jonathan Gruber reminded us, “lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really, really critical for the thing to pass.”
Trump and his administration are simply not capable of a sustained effort like that. The president doesn’t have the attention span or the interest. Already this morning, the president — three months away from Election Day — is back to tweeting about “very poor morning TV ratings for MSDNC’s Morning Joe, headed by a complete Psycho named Joe Scarborough and his ditzy airhead wife, Mika.”
Is the President Still Treated As If He’s the Head of State?
Trump is president, but the world does not really respond to him as if he’s president anymore. He’s just some guy who goes out and says things, either from the White House or on Twitter, that have little impact on what the federal government actually does.
He’s kept far away from the White House staff’s negotiations with Congress about economic relief. His own staff reportedly “routinely ignores his orders.” After Trump threatened to use the Insurrection Act to send the U.S. military into cities to control riots, Defense secretary Mark Esper publicly disagreed: “The option to use active-duty forces in a law enforcement role should only be used as a matter of last resort, and only in the most urgent and dire of situations. We are not in one of those situations now.”
Trump calls for schools to reopen, but at least half the country’s public schools will remain online-only this fall. Trump calls for college football to be played this autumn, but most conferences are canceling the seasons or hoping the outlook is better in the spring. The Commission on Presidential Debates is ignoring Trump’s demands for a fourth debate and his list of acceptable moderators. After Trump threatened executive orders to restrict drug prices, the CEO of Pfizer Pharmaceuticals shrugged off the president’s threats as an irrelevant distraction: “I don’t think there is a need right now for White House meetings.”
Certainly, foreign leaders feel little pressure to do as Trump says, even after he’s spent years trying to build up a relationship.
Does the president still have a “bully pulpit” when so many people shrug off his statements as if he’s just “Donnie from Queens on the car phone” calling in to a talk-radio station?
Democrats are obsessively consumed with a desire to beat Donald Trump and ensure that he no longer have the powers of the presidency. But looking at the big picture of this administration at this moment . . . how much does Trump have the powers of the presidency now?
ADDENDUM: In case you missed it yesterday, these days are probably as good as it gets for Joe Biden. It all gets harder from here for the former vice president.