The Daily Signal pitches “commonsense solutions” to make Social Security worse

On May 6, the Social Security trustees released their annual report outlining the short- and long-term financial positions of the Social Security insurance programs serving retirees, survivors of deceased workers, and people with disabilities. The report itself actually noted that the program’s long-term financial outlook had improved somewhat over the past year, but that did not dissuade Social Security’s opponents from releasing salvos meant to undermine the program.

On May 7, The Daily Signal published a blog using research from the Heritage Foundation and the right-wing Manhattan Institute to raise questions about Social Security's viability and public utility. The piece deployed a handful of common misdirections before focusing in on its primary concerns: guaranteeing that taxes on the wealthy aren't increased to fund Social Security, and diverting money away from the federally guaranteed program toward volatile private investments.

On May 13, The Daily Signal followed up with another foray proclaiming that Social Security is “a bad deal for most Americans” while again fixating on supposedly onerous tax increases that may be implemented in the future to fully fund benefits over the coming decades. At its conclusion, the blog let slip that proposed reforms endorsed by the Heritage Foundation would include reductions in Social Security benefits for future generations of retirees:

Some commonsense solutions include gradually shifting to a universal benefit based on years of work instead of total earnings, automatically updating the program’s eligibility age to align with changes in life expectancy, and using more accurate statistics to adjust benefits.

Heritage’s supposed Social Security “solutions” would have the effect of reducing benefits while siphoning revenue out of the system.

Every time a purported savior of Social Security floats a proposal to supposedly protect the program by reducing future benefits, people should be reminded of an observation made by Nobel Prize-winning economist Paul Krugman more than a decade ago:

The risk is that we might, at some point in the future, have to cut benefits; to avoid this risk of future benefit cuts, we are supposed to act pre-emptively by...cutting future benefits. What problem, exactly, are we solving here?

The Heritage Foundation wants to dismantle Social Security

The decadeslong conservative project to unwind popular and successful programs like Social Security is alive and well. The ideologues organizing against Social Security, like the Heritage Foundation, have been open about their intentions in the lead-up to the 2024 election.

Making matters worse, the right's anti-Social Security narrative has worked its way into the general discourse at some mainstream outlets. The Washington Post and The New York Times, which are often derided as “liberal media” by their partisan opponents, subjected readers to conservative talking points in their news write-ups of the latest trustees report.

In this instance, Heritage and The Daily Signal seem to be using overhyped concerns about future payroll tax increases to build support for their proposals to cut benefits (by raising the retirement age, lowering cost of living adjustments, and changing the way benefits are calculated) and using exaggerated promises of investment returns to encourage privatizing the Social Security system.

The tax complaint is a red herring.

Simply eliminating the payroll tax cap, which is currently indexed to $168,600, without increasing outlays would extend full benefits payable from the Social Security trust fund to at least 2060, according to current projections. (The Daily Signal actually admitted this when it proclaimed that “eliminating the Social Security tax cap entirely would only solve about half of Social Security’s shortfalls.”)

As it currently stands, every dollar earned after that $168,600 threshold is exempt from payroll taxes, resulting in people with extremely high incomes contributing a lower percentage of their income to Social Security than people who earn less. Only about 6% of workers are currently earning above this cap, but widening economic inequality has resulted in nearly 18% of taxable income becoming exempt from payroll taxation.

Taxing this currently exempt income would not affect the vast majority of workers currently paying into the system.

Instead of simply taxing the wealthy, The Daily Signal suggested what it deems to be “commonsense solutions” (like benefit cuts) as well as a privatization scheme, which Heritage has branded as “a personal ownership option” or “personal retirement account.” According to Heritage, “the average worker could receive three times as much from a personal retirement account, compared to what Social Security provides.”

But there is a catch.

Heritage's calculations for the rate of return on its branded personal retirement accounts are based on a number of assumptions that intentionally depress the future value of Social Security (they looked at two options: a 20 percent benefit cut after 2034 or drastically increased future tax rates for all workers, not just the rich) to manufacture the conclusion that “virtually all workers ... would be far better off with personal savings than Social Security.”

The reality is that privatization schemes for Social Security have been bandied about for decades — the Brookings Institution, The Century Foundation, the Economic Policy Institute, and the Center on Budget and Policy Priorities all tackled privatization efforts during the Clinton and Bush administrations — and they always serve as a Trojan horse to dismantle the program.

Privatization schemes would replace a federally guaranteed benefit available to tens of millions of working Americans with a volatile investment account subject to the whims of the business cycle, with no clear protections against economic downturns or other risk factors.