Reagan would fight his campaign to do so on two key fronts. First, he would attack labor unions, whose power had expanded in the years since the 1935 Wagner Act (officially the National Labor Relations Act) guaranteed workers the right to bargain collectively with their employers over wages and workplace rules. Such organizing rights had been hard-won indeed. Not a few workers died at the hands of the police or domestic mercenaries like Pinkerton agents, especially in the early 1930s. By the mid-1950s, union membership would peak at around 35% of workers, while wages would continue to grow into the late 1970s, when they stagnated and began their long decline.
Reagan's campaign began with an attack on PATCO, a union of well-paid professionals federally-employed air-traffic controllers which his National Labor Relations Board eventually decertified. That initial move signaled the Republican Party's willingness, even enthusiasm, for breaking with decades of bipartisan support for organized labor. By the time Donald Trump took office in the next century, it was a given that Republicans would openly support anti-union measures like federal "right-to-work" laws, which, if passed, would make it illegal for employers to agree to a union-only workplace and so effectively destroy the bargaining power of unions. (Fortunately, opponents were able to forestall that move during Trump's presidency, but in February 2021, Republicans reintroduced their National Right To Work Act.)
The Second Front and the Third Rail
There was a second front in Reagan's war on the New Deal. He targeted a group of programs from that era that came to be known collectively as "entitlements." Three of the most important were Aid to Dependent Children, unemployment insurance, and Social Security. In addition, in 1965, a Democratic Congress had added a healthcare entitlement, Medicare, which helps cover medical expenses for those over 65 and younger people with specific chronic conditions, as well as Medicaid, which does the same for poor people who qualify. These, too, would soon be in the Republican gunsights.
The story of Reagan's racially inflected attacks on welfare programs is well-known. His administration's urge to go after unemployment insurance, which provided payments to laid-off workers, was less commonly acknowledged. In language eerily echoed by Republican congressional representatives today, the Reagan administration sought to reduce the length of unemployment benefits, so that workers would be forced to take any job at any wage. A 1981 New York Times report, for instance, quoted Reagan Assistant Secretary of Labor Albert Agrisani as saying:
"'The bottom line" is that we have developed two standards of work, available work and desirable work.' Because of the availability of unemployment insurance and extended benefits, he said, 'there are jobs out there that people don't want to take.'"
Reagan did indeed get his way with unemployment insurance, but when he turned his sights on Social Security, he touched Tip O'Neill's third rail.
Unlike welfare, whose recipients are often framed as lazy moochers, and unemployment benefits, which critics claim keep people from working, Social Security was then and remains today a hugely popular program. Because workers contribute to the fund with every paycheck and usually collect benefits only after retirement, beneficiaries appear deserving in the public eye. Of all the entitlement programs, it's the one most Americans believe that they and their compatriots are genuinely entitled to. They've earned it. They deserve it.
So, when the president moved to reduce Social Security benefits, ostensibly to offset a rising deficit in its fund, he was shocked by the near-unanimous bipartisan resistance he met. His White House put together a plan to cut $80 billion over five years by among other things immediately cutting benefits and raising the age at which people could begin fully collecting them. Under that plan, a worker who retired early at 62 and was entitled to $248 a month would suddenly see that payout reduced to $162.
Access to early retirement was, and remains, a justice issue for workers with shorter life expectancies especially when those lives have been shortened by the hazards of the work they do. As South Carolina Republican Congressman Carroll Campbell complained to the White House at the time: "I've got thousands of sixty-year-old textile workers who think it's the end of the world. What the hell am I supposed to tell them?"
After the Senate voted 96-0 to oppose any plan that would "precipitously and unfairly reduce early retirees' benefits," the Reagan administration regrouped and worked out a compromise with O'Neill and the Democrats. Economist (later Federal Reserve chair) Alan Greenspan would lead a commission that put together a plan, approved in 1983, to gradually raise the full retirement age, increase the premiums paid by self-employed workers, start taxing benefits received by people with high incomes, and delay cost-of-living adjustments. Those changes were rolled out gradually, the country adjusted, and no politicians were electrocuted in the process.
Panic! The System Is Going Broke!
With its monies maintained in a separately sequestered trust fund, Social Security, unlike most government programs, is designed to be self-sustaining. Periodically, as economist and New York Times columnist Paul Krugman might put it, serious politicians claim to be concerned about that fund running out of money. There's a dirty little secret that those right-wing deficit slayers never tell you, though: when the Social Security trust fund runs a surplus, as it did from 1983 to 2009, it's required to invest it in government bonds, indirectly helping to underwrite the federal government's general fund.
They also aren't going to mention that one group who contributes to that surplus will never see a penny in benefits: undocumented immigrant workers who pay into the system but won't ever collect Social Security. Indeed, in 2016, such workers provided an estimated $13 billion out of about $957 billion in Social Security taxes, or almost 3% of total revenues. That may not sound like much, but over the years it adds up. In that way, undocumented workers help subsidize the trust fund and, in surplus years, the entire government.
How, then, is Social Security funded? Each year, employees contribute 6.2% of their wages (up to a cap amount). Employers match that, for a total of 12.4% of wages paid, and both put out another 1.45% each for Medicare. Self-employed people pay both shares or a total of 15.3% of their income, including Medicare. And those contributions add up to about nine-tenths of the fund's annual income (89% in 2019). The rest comes from interest on government bonds.
So, is the Social Security system finally in trouble? It could be. When the benefits due to a growing number of retirees exceed the fund's income, its administrators will have to dip into its reserves to make up the difference. As people born in the post-World War II baby boom reach retirement, at a moment when the American population is beginning to age rapidly, dire predictions are resounding about the potential bankruptcy of the system. And there is, in fact, a consensus that the fund will begin drawing down its reserves, possibly starting this year, and could exhaust them as soon as 2034. At that point, relying only on the current year's income to pay benefits could reduce Social Security payouts to perhaps 79% of what's promised at present.
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