A Better Social Security Idea for Trump

Trump’s idea to stop taxing Social Security benefits points in the right direction.

But as everyone immediately pointed out, it does not rectify the regressiveness of the Social Security system. While rich people hardly notice Social Security, the poor are often dependent on it for their financial survival. The chief argument in favor of removing the current tax is Milton Friedman’s dictum: “say yes to any tax cut at any time.”

The best thing we could do for Social Security is to eliminate the Social Security tax entirely and fund the program out of general revenues. The Social Security tax is assessed on one’s willingness to work or to hire workers. For America today, that is as big a cultural mistake as an economic one.

Short of abolishing the tax entirely, however, it’s easy to improve on Trump’s proposal. What he should propose instead is to eliminate the Social Security tax for people who keep working after what we used to consider retirement age. Today, it’s somewhere between age 62 (current early retirement for Social Security purposes) and age 67 (current standard retirement). We should eliminate both the “employer-paid” portion, as well as the employee portion to encourage companies to hire seniors.

America is short on workers. (Well, just about every country is always short on workers. The Roosevelt era myth that my work takes away your opportunity to work, was as obtuse about capitalism as most of the New Deal.) Workforce participation has mostly recovered from immediate pre-pandemic levels. But it has been in steep decline since 2007 and remains far below its Reagan-era, 1985-2007 range of 65-66%. (See graph)

And that’s not the half of it. As usual, it’s the men who are goofing off. Male work had been in decline post WWII. It somewhat stabilized in the Reagan era.  But it then dropped steeply–by five points–from 2000 till 2015.

Then came the pandemic slump. The male participation rate at first bounded back steeply.  But then it flattened and recovery halted.

By contrast, the female labor force participation rate (which rose dramatically from the 1950s on) fell much less steeply after 2007.

And women’s work recovered sharply after the pandemic and has continued to rise.

The biggest goof-offs are older men. They dropped out massively during the pandemic and have hardly come back at all. The graph below combines the sexes for over-65s but most of the quitters are men.

We need to get these guys back to work and back into marriage. And for both men and women, we need break the back of the cultural assumption that work stops in one’s 60s. Though the relentless rise in U.S. life-expectancy paused for the pandemic and its failed masks and mandates, life-science developments essentially guarantee the rise will resume and accelerate. U.N. projections add barely four years (increasing to a bit more than 83 years) to U.S. life expectancy by 2025. Based on technologies already in the pipeline, we will more likely double that to nearly 90.

With cancer and diseases of the elderly taking a huge hit, the increase in life expectancy from age 65 will likely increase even more rapidly. Most of your grandchildren will make it to 100. The system cannot support 25—or 40—years of non-work. And few would want it to. Retirement is already fading as an ideal.  We should do what we can to hasten its decline. The longer Americans work, the happier they will be and the richer and stronger our country.

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