Image source: Getty Images.
Continue Reading Below
Social Security is a major issue in the presidential election. First of all, the vast majority of Americans either collect Social Security benefits or plan to do so in the future. And it's no secret that Social Security isn't exactly in the best financial shape right now. Here's what you need to know about both candidates' plans for Social Security and what's likely to actually happen.
Donald Trump's stance on Social Security
In contrast to most other republicans, Donald Trump doesn't want to cut Social Security. However, his solution to Social Security's funding problem isn't to raise taxes or reduce benefits for the rich. Instead, Trump feels that his tax cuts will stimulate the economy to a point where Social Security's problem will take care of itself.
He certainly makes a valid point. Job and wage growth would undoubtedly lead to more money flowing into Social Security's trust funds as a result of the higher payroll taxes that would be collected. Even so, there are a few issues that critics have with Trump's logic:
- No president can guarantee economic growth -- not even with massive tax cuts.
- We're not worried about Social Security over Trump's hypothetical four- or eight-year presidency. In fact, Social Security can afford to pay all promised benefits through 2034. We're worried about Social Security 20, 30, and 50 years from now and therefore need long-term fixes.
- According to a model by the Urban Institute, even if Trump manages to boost GDP growth to 3.4% per year in perpetuity (the historical average), it would simply delay Social Security's financial problems by 30 years, not solve them.
To be fair, this isn't the only way Trump has suggested to fix Social Security. For example, Trump has suggested that we cease foreign aid to countries that "may want to kill us" and direct that money to Social Security instead. And, he has pledged to eliminate fraud and waste within the system. Finally, Trump's campaign has said that after his tax plans boost the economy, he would revisit Social Security's funding issues.
It's entirely possible that if Trump gets elected, his tax cuts will boost the economy enough that Social Security runs a surplus, and that his fraud elimination saves taxpayers a lot of money.
Hillary Clinton's plans for Social Security
In contrast, Hillary Clinton's plan for Social Security is more traditional. Essentially, not only does she not want to cut benefits, she wants to expand them, particularly for widows and family caregivers. To pay for it, she wants to increase Social Security taxes on the rich.
As of 2016, only the first $118,500 in wage income is subject to Social Security tax. While we don't know specifics yet, Clinton wants to raise, or possibly even eliminate, this cap.
How feasible is Clinton's plan? I've written before that the majority of Americans on both sides of the political spectrum, in all age groups, and in all income brackets agree with the following statements:
- Social Security is important to preserve for future generations.
- I don't mind paying taxes for Social Security.
- I wouldn't mind a tax increase if it strengthened Social Security.
So, it appears that the American public would embrace Clinton's solutions. However, if elected president, she'll need to get Congress to play ball, which is no easy task.
Both are saying surprisingly little about Social Security
Whether you take Trump's view that Social Security is simply having a cash flow problem that can be solved by stimulating the economy, or think that Clinton's plan of taxing the rich to expand Social Security is the better idea, one thing is for certain. Both candidates really haven't talked much about Social Security, nor have they offered much in the way of concrete plans, at least when compared with other campaign issues.
This is particularly surprising, as Social Security is an issue that affect or will affect virtually all Americans. About 90% of senior citizens are at least somewhat reliant on their Social Security income to maintain their standard of living, and the 18-year period until Social Security's trust funds run dry will fly by before we know it.
The $15,834 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.Simply click here to discover how to learn more about these strategies.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.