It was reported this week that President Donald Trump’s budget proposal will not include cuts in Medicare and Social Security. However, Congressional Republicans, particularly in the House, apparently want to make cuts in entitlement programs, especially because Trump intends to make massive cuts in the “discretionary” parts of the budget which are not mandated. Trump wants to increase military spending by 10% and enact massive tax cuts that will reduce government revenues. Congressional budget hawks are insisting that cuts in Medicare and Social Security have to be included in the budget because they do not want to decimate other programs in the discretionary parts of the budget.
Of course, Democrats will view these are false choices since the big tax cuts will throw the budget further into a deficit. No revenues are being contemplated such as raising the earnings ceiling on which Social Security is taxed. There is serious concern whether Republicans who are now in control of Congress can even pass a budget because there is division in their own ranks about the Affordable Care Act as well as how to tackle tax reform and budget cuts.
Another issue is that Republicans have been insisting that their plans for Social Security and Medicare will not hurt current beneficiaries. If they go ahead with plans to cut the programs, will they keep that position because the changes they envision will only produce savings in the distant future, such as making Medicare a voucher program. Or, will they try to cut the programs now in some way, for example, by reducing the cost of living adjustment for Social Security. Of course, the COLA was less than 1% this year and it was zero in one other recent year.
The clashes to come will sharply mark the position of both parties but the Republican party may have a clash internally about whether it embraces Trump’s more populist approach on retiree benefits. Trump has expressed the view that the economic growth he hopes for will stimulate the economy and with stronger employment will produce more money going into the Trust Funds.
It is important to keep in mind that both Medicare and Social Security have enough funds for many more years to keep paying full benefits and they are a wide variety of choices, without privatization, to make changes that will further stabilize the trust funds for additional years.