• The Social Security and Medicare trust funds were in trouble  before the coronavirus hit, exploding unemployment and reducing payroll tax receipts
  • Lawmakers on both sides of the aisle objected to the payroll tax freeze. It was not among the contentious issues blocking a coronavirus relief agreement
  • Experts say Trump cannot act unilaterally to eliminate the payroll tax

President Trump long has wanted to eliminate Social Security and a memorandum during the weekend freezing payroll taxes could go a long way toward damaging both it and Medicare beyond repair.

Neither trust fund was in great financial shape before the coronavirus pandemic hit, with trustees calling on Congress to take action to shore up shortfalls. Projections had Social Security solvent until 2034 but Medicare only able to pay full benefits through 2026.

Freezing payroll taxes exacerbates the already dire situation.

"It is far from clear that the payroll tax holiday will achieve its intended objective of, as the president said, 'save American jobs and provide relief to the American workers,'” senior analyst Mark Hamrick said in an email to International Business Times. “First, the action is a deferral of these taxes, not an elimination of them. So, the bill is still due, it just isn’t due in the short-term. Let’s remember it is the unemployed who need help, not so much Americans who are still working and who’d get the benefit.”

The payroll tax takes 6.2% of Americans' salaries. A like amount is contributed by their employers.

Trump said he took the action because he was unable to reach a deal with leading Democrats on extending the $600 a week pandemic unemployment benefit and other key issues. By Monday, he was again taking shots at lawmakers.

But a payroll tax freeze was not even on the table during talks, with lawmakers from both sides of the aisle rejecting the idea.

Trump said Saturday he would pursue a permanent cut to payroll taxes if he is re-elected in November.

“If I’m victorious on Nov. 3, I plan to forgive these taxes and make permanent cuts to the payroll tax. So I’m going to make them all permanent,” Trump told a press briefing Saturday.

Such action would turn Social Security, often characterized as the third-rail of American politics, and Medicare into just two more entitlement programs rather than operations with their own trust funds funded by a dedicated revenue stream, opening them up to the vagaries of federal budget machinations and swelling the federal budget deficit – already nearing $1 trillion in June. The July deficit report is due Wednesday.

Professor Robert Johnson of the Heider College of Business at Creighton University called advocating for the end of Social Security “is a bridge too far and, effectively, political suicide. Social Security is the social safety that, unfortunately, too many Americans rely upon to provide for their retirement. If a presidential candidate wants to ensure turnout among older votes in the general election, simply advocate for the elimination of Social Security.”

Paul Miller, a certified public accountant and managing partner of Miller & Co., said Trump knows full well he doesn’t have the power to unilaterally eliminate Social Security.

At the same time, Miller acknowledges the program has been in trouble for a long time.

“It definitely needs to be updated and revised to support the longer-living population. But the new system needs to be a bipartisan plan that is clearly defined and equitable where the people remain at the same income level and know what they are paying into and what they are getting. Today the system is a hot mess,” he said.

The system was last overhauled in 1983.

Political consultant Matt Klink said it’s unlikely Trump’s action will have much impact.

“Efforts to reform Social Security will appeal to Trump's base. Both Republicans and Democrats have hinted at 'reform' over the decade. But, every time the topic comes up, the opposite party attacks it as a threat to Social Security and torpedoes reform,” he told IBT.