Yahoo Finance Trump Outlines a Significant Social Security Cut in His 2020 Budget
This past Monday, March 11, President Trump unveiled his fiscal 2020 budget proposal for the federal government. As a reminder, fiscal years for the federal government end on Sept. 30 and begin on Oct. 1. Unveiling a budget months in advance of the actual implementation is supposed to allow Congress to make tweaks, as needed, to get a yearlong budget passed.
Trump's 2020 budget featured a lot of talking points (as presidential budgets often do), a number of which came under harsh criticism by members of the Democratic Party.
President Trump giving remarks at the Pentagon. Image source: Official White House Photo by Tia Dufour.
In particular, political opponents of the president focused on a handful of proposed cuts to social programs, which go against Trump's campaign promises in 2016 not to touch so-called entitlement programs like Medicare and Social Security.
Contained within the president's budget were calls for about $1.5 trillion in cuts to Medicaid over the next 10 years, which would be achieved by moving payouts to block grants; an $845 billion reduction to Medicare spending over the next decade that targets a decrease in wasteful spending via lower prescription drug costs; and -- surprise -- a roughly $26 billion decrease in Social Security spending over the next 10 years.
Trump's budget calls for a big change to Social Security's disability program
While Trump's budget proposal aims to curtail a number of perceived inefficiencies with the Social Security program, the bulk of the savings ($10 billion total between 2020 and 2029) are expected to be realized from a single change to the Social Security Disability Insurance program.
As of January 2019, according to the Social Security Administration (SSA), 10.15 million people were receiving a Disability Insurance benefit payment each month, 8.52 million of whom were long-term disabled workers. Of course, proving a long-term disability to the SSA, assuming you have the required lifetime work credits to receive a disability benefit, isn't a flip-of-the-switch process. Rather, the average time from application to approval can take around five months.
Image source: Getty Images.
However, not all disability recipients file their claims with the SSA right away. Should you choose to apply for Social Security Disability Insurance long after you've actually become disabled, you may be able to receive retroactive benefits. These retroactive disability benefits would cover the time period from when you actually became disabled through when you applied for Social Security Disability benefits, with a maximum collectible period of 12 months.
It should be noted that the SSA will subtract the five-month waiting period from your filing, meaning you must apply for benefits 17 months or longer after the onset of your disability if you're to receive the full 12 months of retroactive disability pay.
Trump's budget proposal for fiscal 2020 aims to halve the amount of retroactive pay disabled persons can recover to six months from 12 months. Doing so would reduce program outlays by $3.61 billion between 2020 and 2024, and almost $10 billion on the dot, in aggregate, over the next decade.
Relax, folks, this Social Security cut has virtually no chance of being implemented
With Trump proposing $26 billion in cuts to Social Security between 2020 and 2029, you might be growing a bit concerned that bigger expenditure cuts might follow. But this is the point where I tell you that everything's going to be OK. In fact, the chance of this particular proposal being implemented is very slim, in my opinion.
To begin with, presidential budgets are often a rough draft from which Congress begins pushing and pulling to fit certain fiscal and political agendas. Or, in plain English, it's a starting point from which discussion begins, not a final draft. By the time a federal spending bill has been signed into law, it often looks nothing like the annual budget or 10-year projections presented months earlier by the president.
Image source: Getty Images.
Secondly, a divided Congress practically ensures that next to nothing is going to get done when it comes to major social programs like Medicare, Medicaid, and Social Security. Democrats in the House are certain to oppose any reduction to Social Security benefits, including halving the period whereby retroactive disability benefits can be collected. Without support from the Democratic majority in the House, I don't see how this provision has any chance of being included in a final spending bill for fiscal 2020.
Third and finally, Trump is unlikely to take a hard-line stance on keeping this provision in his budget, especially with his own election now less than 20 months away. Back in 2013, while speaking at the Conservative Political Action Conference, Trump had this to say:
As Republicans, if you think you are going to change very substantially for the worse Medicare, Medicaid, and Social Security in any substantial way, and at the same time you think you are going to win elections, it just really is not going to happen... What we have to do and the way to solve our problems is to build a great economy.
In other words, Trump understands that direct changes to Social Security means some group is going to lose out and be worse off than they were before. Therefore, making any direct changes to Social Security prior to an election is akin to political suicide.
Long story short, President Trump's budget is bound to hit on a number of talking points, but it's unlikely to incite any change to the existing structure of the Social Security program.
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