A second Trump presidency is likely to bring more austerity than the first one did.
During his 2016 campaign, Donald Trump called for a ban on all Muslim immigration to the United States, the targeted assassination of terrorists’ family members, the overturning of Roe v. Wade, the repeal of the Affordable Care Act, and enormous corporate tax cuts.
And voters considered him the most “moderate” Republican candidate in more than four decades.
To the extent this perception had any basis in reality, it reflected Trump’s genuine moderation on one highly salient issue: Unlike many of his GOP predecessors, the mogul emphatically opposed any cuts to Medicare and Social Security. This likely made it a bit easier for ideologically conflicted older Rust Belt voters to pull the lever for a Republican.
As president, Trump never pursued large cuts to Medicare or Social Security benefits and implored his party to avoid them during the debt ceiling fight last year.
Since the days of FDR, Democrats have profited from their reputation as the more stalwart guardians of entitlement benefits. Trump’s triangulation threatens to nullify that critical source of partisan advantage. President Joe Biden has therefore sought to portray Trump’s avowed support for Social Security and Medicare as fraudulent. And on Monday, the presumptive GOP nominee bolstered the president’s case.
In an interview with CNBC, Trump said that he was open to cutting entitlement spending. Then, his campaign said that he wasn’t.
Trump’s reflections on public policy tend to bear only a loose resemblance to coherent thoughts. And his remarks about entitlements on CNBC Monday were no exception. In that exchange, anchor Joe Kernen told Trump that “something has to be done” about entitlement costs, then asked if the former president had changed his mind about cutting “Social Security, Medicare, [and] Medicaid” in light of the rising national debt.
Trump replied:
So first of all, there is a lot you can do in terms of entitlements, in terms of cutting, and in terms of, also, the theft and the bad management of entitlements — tremendous bad management of entitlements. There’s tremendous amounts of things and numbers of things you can do. So I don’t necessarily agree with the statement.
Biden pounced on Trump’s words, posting a clip of the Republican’s answer and vowing that no cuts to entitlements would be allowed “on my watch.” The Trump campaign replied, “If you losers didn’t cut his answer short, you would know President Trump was talking about cutting waste.”
This rebuttal is disingenuous. Trump plainly stated that there was a lot that the government could do “in terms of cutting” entitlements and “also” in terms of combating “theft and bad management of entitlements.” What precisely the former president is referring to when he alleges that Social Security, Medicare, and Medicaid are rife with theft, bad management, and waste is unclear. And neither he nor his campaign has produced any actual evidence of such improprieties.
This said, it’s also true that, by the end of his answer, Trump was evincing disagreement with Kernen’s statement that entitlements needed to be cut. So, one could reasonably argue that, as with so many of Trump’s statements, his musings on entitlement reform were too suffused with internal contradictions and baseless demagogy to have any concrete meaning.
Yet Trump’s gaffe is not the only reason for voters to fear that a Republican victory in November could lead to leaner Social Security benefits.
For one thing, Trump spent his entire presidency trying to cut Medicaid, an entitlement program that provides not only health insurance for low-income Americans, but also long-term care for older voters. And he has tried to cut Social Security benefits for disabled and low-income people.
For another, the GOP’s avowed fiscal commitments cannot be reconciled with preserving Medicare and Social Security in their present forms. Congressional Republicans are committed to enacting trillions of dollars worth of new tax cuts, perennially increasing defense spending, and balancing the federal budget. There is no politically tenable way to do this without cutting Social Security or Medicare.
This is because those two programs collectively account for about a third of the federal budget, and that share is poised to rise sharply in the coming decade. As the baby boomers retire, Social Security and Medicare spending are set to nearly double by 2033. At that point, if current spending levels persist, the government will spend more on Social Security than on the entire defense and non-defense discretionary budgets.
Balancing the budget in 10 years — without raising taxes or touching defense, Social Security, or Medicare — would require cutting all other programs by roughly 70 percent. Austerity that severe would debilitate myriad public services that conservative constituencies rely on. Partly for this reason, when the House’s largest Republican caucus, the Republican Study Committee, sat down to write their dream budget last year, they ended up including large cuts to Social Security.
Of course, there’s little reason to believe that the GOP would actually try to balance the federal budget if they took power next year. Historically, Republican presidents have been prolific expanders of the federal deficit.
Still, the GOP will likely feel more compelled to at least offset their desired tax cuts with spending reductions in 2024 than they did during Trump’s first term.
Back then, Republicans borrowed their way out of their coalition’s internal contradictions. Ideologically compelled to cut taxes for the wealthy, but politically incentivized to avoid large spending reductions, the GOP opted to deficit finance Trump’s $1.5 trillion tax cut.
But in 2017, inflation and interest rates had both been stubbornly low for nearly a decade. Thus, Republicans had little cause to fear that they would trigger price increases by injecting $1.5 trillion into the economy.
Meanwhile, the government’s rock-bottom borrowing costs made it possible for Republicans to pass a deficit-financed, $1.5 trillion tax cut without significantly increasing America’s debt-to-GDP ratio.
Seven years later, we’re in a different macroeconomic reality. Inflation remains significantly above the Federal Reserve’s 2 percent target. There isn’t a ton of slack in the economy — which is to say, there aren’t copious underutilized workers and resources. Pumping trillions of dollars into today’s economy is therefore liable to trigger price spikes, as demand for goods and services would likely grow faster than their supply.
Further, in 2021, the average interest rate on a 10-year Treasury bond was 1.7 percent. Now, that figure is 4 percent. According to the Manhattan Institute’s Brian Reidl, a single percentage point increase in America’s long-term borrowing costs has the same fiscal impact as doubling national defense spending. Therefore, unless the Federal Reserve sharply cuts rates, every dollar of deficit spending in 2025 will be much more expensive than it was in 2017.
This is a problem for Republicans, since they are hellbent on enacting trillions of dollars in new tax cuts. Many provisions of Trump’s signature 2017 tax law are set to expire at the end of 2025. Merely extending these measures would cost $3.3 trillion over the coming decade.
But Republicans are not content with preserving past reductions in the fiscal obligations of rich people and business owners. Rather, Trump and his advisers would like to bring the corporate tax rate down from 21 percent to 15 percent. This would cost the Treasury another $522 billion under conventional scoring assumptions, according to the right-leaning Tax Foundation.
Republicans will likely feel compelled to offset at least a large portion of this nearly $4 trillion tax cut. Doing that won’t necessarily require slashing Social Security and Medicare. But if the GOP leaves entitlements alone, then they will need to make painful cuts elsewhere. Most likely, they will target Medicaid, as they did unsuccessfully during Trump’s first term.
In the longer term, though, the GOP will be incapable of reconciling their commitment to ever-lower tax rates with their newfound opposition to Social Security and Medicare cuts. As currently structured, those programs are not self-sustaining. Funding for them will need to come from somewhere.
In his newly released budget, Biden is clear about how he intends to sustain today’s benefits for tomorrow’s seniors: by raising payroll taxes on US households making over $400,000.
Trump, by contrast, has put forward no plan for sustainably funding Social Security and Medicare. This is likely because there is no politically appealing way to do this while simultaneously lowering taxes on the wealthy; squaring that circle requires proposing draconian cuts to popular programs.
Whatever word salads Trump serves up on cable news, one reality remains clear: A party can either oppose all tax increases, or safeguard Americans’ entitlement benefits, but it cannot do both. It’s possible that a unified Republican government would resist the temptation to slash Social Security in 2025. But let a fox guard the hen house long enough, and your chickens will get eaten.
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