Neither Party Is Solving the Household Debt Problem

How ideological rigidity and political incentives are driving worse outcomes in health care, student loans, and retirement and failing to address Social Security solvency

Abstract

American households are moving toward greater financial distress, yet neither major party’s policy process is structured to improve household solvency. This memo examines four interlocking areas—health insurance, student debt, private retirement savings, and Social Security solvency—and shows how each party’s governing incentives produce predictable failures.

Republicans remain anchored to low taxes, limited government, and market primacy, constraining their ability to address structural burdens already embedded in household balance sheets. Democrats are divided between progressive ambition and centrist caution, leading to temporary programs, fiscal sunsets, and executive-branch workarounds that fail durability tests.

Bipartisan reliance on gimmicks and brinkmanship shifts uncertainty onto households and delays unavoidable tradeoffs. Policy failures in health care and student loans suppress private retirement saving, which in turn makes Social Security reform politically and economically infeasible. The result is a stable political equilibrium and an unstable household outcome: solvency risk is repeatedly deferred until it reappears as a fiscal cliff, a premium spike, or automatic benefit reductions.

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Introduction

American households are on a path towards increased financial distress and neither major political party has an agenda which could lead to better financial outcomes for American households.

Both parties have consistently put the ideological whims and political needs of their party over the best interests of American households.

Both parties have reinforced this pattern through the routine use of fiscal gimmicks that obscure the true cost of their policy commitments. Temporary programs, artificial sunsets, and delayed implementation are repeatedly used to reduce headline budget scores while shifting real costs and uncertainty onto households. The fiscal imbalance inherited from the Obama administration, the Trump-era tax cuts that were designed to expire and later required renewal, and the enhanced ACA premium tax credits all reflect a bipartisan willingness to rely on temporary structures rather than durable policy design. These tactics allow elected officials to claim restraint while avoiding the political consequences of fully funding their priorities.

At the same time, both parties have shown a persistent willingness to postpone meaningful Social Security reform. By deferring adjustments to benefits, eligibility, or financing, policymakers preserve short-term political advantage at the expense of long-term solvency, leaving future households with fewer options and higher risks.

Republican policy thinking remains anchored to low taxes, limited government, and market primacy. These principles are internally coherent, but constraining when applied to problems that are structural, long-term, and already embedded in household balance sheets.

Republicans routinely favor tax and benefit cuts regardless of the cost to vulnerable households. Moreover, Republicans fail to recognize that required adjustments to entitlements to restore solvency to the Social Security Trust funds and put the nation on a more stable fiscal trajectory require reforms which reduce medical and student loan debt and increase private retirement savings.

Democrats are less unified than Republicans. Progressive Democrats are wedded to expensive politically unfeasible options. – Medicare-for-all and debt-free college even when less expensive solutions exist. Centrist Democrats are aware of the economic tradeoffs, but they consistently favor policy proposal designed to placate the political base of their party rather than thinking through the solutions which will work.

The purpose of this memo is to highlight the processes inside both parties which lead to bad policies and financial outcomes in four areas – health care and health insurance, student debt, retirement savings, and trust fund solvency. The memo builds on many of the memos previously published on this blog. The starting point for this discussion is health care and health insurance because the current dispute over the renewal of the ACA premium tax credits illustrates the potential pitfalls of prioritizing politics over the search for better economic solutions.

Health Insurance

Health insurance is the clearest illustration of how both parties subordinate household financial stability to ideological positioning and short-term political incentives. The result is a system that exposes households to rising premiums, volatile coverage, and unaffordable out-of-pocket costs, while leaving the underlying cost drivers largely untouched.

Republican Failures

Earlier generations of Republican policymakers recognized that a purely employer-based system was incompatible with a modern, mobile labor force. Proposals advanced by figures such as John McCain and Mitt Romney acknowledged the need for viable insurance options for individuals outside traditional employment relationships. That recognition has largely disappeared from current Republican policy thinking.

Today, there is far more internal unity within the Republican Party around a narrower, more rigid approach to health insurance policy. While there are occasional expressions of concern from individual lawmakers, they have not translated into meaningful constraints on party action.

Medicare cuts were enacted as part of the 2025 tax legislation despite public reservations from a small number of Republican senators, including Senator Josh Hawley of Missouri—a state highly reliant on Medicare. This pattern is not unique to Missouri: many Republican-controlled states have populations that depend heavily on Medicare and Medicaid, yet Republican lawmakers have repeatedly supported legislation that reduces or constrains these programs. Party discipline and tax priorities have consistently outweighed constituent exposure to health care costs.

Today’s Republican approach combines Medicaid cuts, opposition to ACA subsidies, and an overreliance on Health Savings Accounts (HSAs).

Cutting Medicaid while simultaneously undermining state exchange plans reduces coverage options for precisely the populations most exposed to job instability, health shocks, and income volatility. These are not abstract effects: failure to renew the enhanced ACA premium tax credits would produce an immediate affordability crisis for millions of households, forcing higher premiums, plan downgrades, or outright loss of coverage.

Republican promotion of HSAs as a substitute for insurance affordability reflects a deeper disconnect from household balance sheet realities. HSAs can work for some households when paired with high-deductible plans—particularly higher-income families with stable cash flow who can fund accounts consistently and absorb upfront costs. But for many lower- and middle-income households, even this structure is difficult in practice. When HSAs are linked to bronze or catastrophic plans, the model often becomes untenable: deductibles are too large relative to income, leading to delayed care or foregone treatment rather than meaningful cost management. In these cases, the approach shifts financial risk onto households without addressing underlying medical prices, while delivering tax benefits that disproportionately accrue to those already least financially constrained.

Recent House action underscores that this unity is not absolute, but it remains politically costly to break from the party line. Four Republican members from swing districts voted with Democrats to allow a vote on extending ACA premium tax credits, signaling localized electoral pressure rather than a broader shift in Republican health policy thinking. These defections highlight the gap between national party priorities and district-level exposure to rising insurance costs.

More broadly, Republicans continue to prioritize tax reduction and fiscal retrenchment without acknowledging that household solvency is already impaired by medical debt and insurance volatility. Entitlement reform discussions that ignore the central role of health costs in driving household distress and federal spending are fundamentally incomplete.

Democratic Failures

Unlike Republicans, Democrats are not unified on health care policy. That diversity of views could, in principle, support pragmatic reform. In practice, it has produced a pattern of rhetorical ambition paired with policy temporariness and institutional fragility. Democrats routinely acknowledge that health insurance affordability is a central threat to household solvency, yet their governing choices repeatedly defer durability in favor of internal coalition management.

The most consequential Democratic failure was the decision to make the enhanced ACA premium tax credits temporary. This was not a technical necessity or a Republican imposition; it was a strategic choice made by the Biden administration and a Democratic Congress. Rather than permanently securing the most effective affordability mechanism in the current system, Democrats chose to allocate political and fiscal capital to a broader set of expansive initiatives, including climate and environmental programs, large-scale infrastructure investments, industrial policy subsidies, and price-control and prescription drug provisions championed by progressive factions. Because these initiatives were pursued simultaneously under budget reconciliation constraints, Democrats relied heavily on temporary authorizations, phase-ins, and sunsets to keep headline costs within procedural limits. As a result, millions of households were left exposed to a scheduled affordability cliff, turning a stabilizing policy into a recurring source of uncertainty tied to election cycles.

Progressive Democrats bear particular responsibility for distorting the party’s health care agenda. It is startling, though no longer surprising, that Medicare for All continues to be reintroduced—most recently in 2025—without a credible transition plan from the existing system. The proposal remains largely unchanged despite years of evidence that such a transition would be economically disruptive, politically fragile, and deeply unsettling for households with employer-based or exchange coverage they value.

Medicare for All now functions less as a governing proposal than as an ideological marker. Its persistence reflects its role in progressive identity politics rather than its feasibility as a policy framework. This comes at a real cost: by centering an all-or-nothing vision, progressives crowd out incremental reforms that could materially improve affordability and stability within the existing system. Most notably, the proposal would eliminate state insurance exchanges, the most functional and adaptable institutional achievement of the ACA. Democrats thus undermine their own most successful reform by refusing to treat it as permanent infrastructure.

Centrist Democrats are not unaware of these tradeoffs. Many recognize that permanently extending ACA subsidies, improving exchange design, and reducing out-of-pocket exposure would deliver immediate gains to household solvency. Yet they have consistently chosen to accommodate progressive messaging priorities rather than force hard internal decisions. The result is a pattern of sunsets, pilot programs, and temporary fixes that weaken both household planning and insurer participation.

More broadly, Democrats share responsibility for failing to confront the structural drivers of health care costs. While they are more willing than Republicans to acknowledge market failures, they have not produced a coherent strategy to restrain cost growth without expanding federal exposure to budgetary risk. Nor have they meaningfully addressed the labor disincentives created by subsidy phaseouts or the instability caused by linking coverage to employment, despite clear evidence that expanding and stabilizing state-based exchanges—or further decoupling insurance from jobs—would reduce coverage losses during job transitions and economic downturns. These omissions reflect a deeper reluctance to make tradeoffs explicit, even when doing so would improve long-term outcomes.

In sum, Democratic health care failures stem not from denial of the problem but from an inability to prioritize durability over coalition politics. By favoring symbolic ambition and temporary relief over institutional permanence, Democrats have left households exposed to the very instability they claim to oppose.

Both Party Failures

Both parties share responsibility for ignoring the core structural problems in health insurance. Neither has offered a serious strategy to control medical cost growth, which continues to drive premiums, deductibles, and out-of-pocket expenses higher than household income growth. Insurers respond by rationing care through narrow networks, aggressive claim denials, and extended review processes—mechanisms that shift administrative and financial burdens onto households while eroding trust in coverage.

Both parties also ignore the high implicit marginal tax rates embedded in ACA premium subsidies. As income rises, households can face steep effective penalties through subsidy phase-outs, discouraging additional work or income gains. This interaction between health insurance affordability and labor incentives receives little attention despite its direct impact on household economic behavior.

Finally, both parties have failed to address the systemic fragility created by tying health insurance to employment. Job transitions, layoffs, and economic downturns routinely trigger coverage disruptions precisely when households are least able to absorb them. This linkage amplifies financial stress during recessions and reinforces the cyclical nature of medical debt accumulation.

In aggregate, these failures reflect a shared unwillingness to treat health insurance as a core component of household solvency rather than a partisan symbol. Until both parties shift from ideological signaling to structural reform, health insurance will remain a central driver of financial instability for American households.

The most troubling feature of current party governance is a growing willingness to govern by brinkmanship. The ongoing dispute over extending the ACA premium tax credits illustrates how both parties are prepared to play chicken with household financial stability in pursuit of political leverage. If this conflict is not resolved, many households reliant on state exchanges will face sharply higher premiums or the loss of insurance altogether. This episode raises a more consequential question: if both parties are willing to risk disruption in a program affecting millions of insured households, will they exercise greater restraint when confronting far larger and more politically sensitive challenges, such as the automatic benefit reductions triggered by Social Security trust fund insolvency?

Student Debt Failures

As with health insurance, student debt policy failures can be traced to a combination of Republican rigidity and focus on tax policy, Democrats emphasizing the whims of the progressive base over solid durable policy, and bipartisan reliance on structurally weak solutions. The result is a system that increases borrowing costs, extends repayment horizons, and undermines household balance sheets at precisely the stage of life when families should be building savings.

Republican Failures

Republicans are highly unified in their view that federal aid to students should be tightly limited and that higher education should not be broadly subsidized. Republican lawmakers have repeatedly argued that workers who did not attend college should not be asked to subsidize those who did, framing student aid as an issue of fairness rather than long-term economic capacity. This position has translated into policy choices that prioritize fiscal restraint over borrower sustainability.

Republicans now largely own federal student loan policy following the comprehensive overhaul enacted in the 2025 tax legislation.

That legislation replaced the SAVE income-driven repayment program with the Repayment Assistance Plan (RAP), which is substantially less generous for many borrowers. Under RAP, monthly payments are higher for a large share of borrowers, income protections are weaker, and some borrowers will now be required to make payments for up to 30 years before any remaining balance is discharged.

RAP introduces sharp payment increases tied to each $10,000 rise in adjusted gross income, creating abrupt effective marginal tax rate cliffs that discourage income growth and career advancement. In addition, RAP payments are not indexed to inflation. Over time, this lack of indexation will steadily increase the real burden of student loan payments, leading to higher delinquency, extended repayment periods, and growing household financial stress.

Republicans have also imposed tighter limits on federal direct student loan borrowing. While intended to constrain costs, these limits will raise borrowing costs for students in high-cost professional programs, particularly young doctors and lawyers. Increased reliance on private credit may deter entry into lower-paying but socially valuable specialties, including primary care and public interest law.

More broadly, Republicans fail to recognize that higher student debt burdens directly impair households’ ability to save for retirement. This omission is particularly consequential given Republican interest in reforming Social Security. Any successful effort to reduce reliance on Social Security benefits requires higher levels of private retirement savings, a goal incompatible with prolonged, inflation-unprotected student loan repayment.

Democratic Failures

Democratic student debt policy has been overwhelmingly shaped by efforts to satisfy progressive demands for free college or universal debt-free education. Proposals advanced by Senator Bernie Sanders and Senator Elizabeth Warren have centered on large-scale federal financing of tuition or broad cancellation of existing student debt, often without sufficient differentiation between borrowers facing genuine affordability constraints and those capable of financing higher education with more limited support.

The fundamental problem with this approach is that public resources are finite and fungible. Many households can already pay for college without this level of government assistance or would require far less support than these proposals provide. Expansive student debt subsidies at this scale necessarily divert funding from other costly priorities, including health care affordability, childcare, housing, infrastructure, climate adaptation, and long-term entitlement solvency. These tradeoffs are rarely confronted directly.

President Biden’s student debt strategy, like the ones advanced by the progressives in the party, did not seek to provide debt relief in the most economically efficient way. In his first attempt at broad loan cancellation, the administration relied on emergency powers under the HEROES Act of 2003, asserting that the COVID-19 pandemic justified sweeping debt relief. That effort was rejected by the Supreme Court, which concluded that the statute did not authorize such a large-scale restructuring of federal student loan obligations.

Following that decision, the administration pursued a second approach grounded in the Department of Education’s authority under the Higher Education Act, particularly provisions allowing the Secretary to compromise, waive, or release federal claims. This second effort was narrower in scope but remained legally contested and institutionally fragile.

At the same time, the Biden administration advanced the SAVE income-driven repayment program, which substantially reduced required payments and accelerated forgiveness for many borrowers. While SAVE improved short-term affordability, it relied heavily on long-term loan discharge rather than repayment and proved politically vulnerable. Legal challenges, administrative uncertainty, and subsequent policy reversal under the Trump administration underscored the program’s lack of durability.

President Biden faced genuine political and legal opposition, but the broader failure remains unchanged. His administration did not establish a student loan framework capable of surviving beyond his presidency. By prioritizing maximal relief and symbolic alignment with the progressive base, the administration crowded out the development of a more modest but durable repayment system that could have provided long-term certainty for borrowers.

Both Party Failures

Both parties rely heavily on income-driven repayment (IDR) programs as the primary mechanism for managing student debt burdens. For many borrowers entering the workforce with low starting salaries, IDR plans are the only feasible option for avoiding delinquency. However, excessive reliance on IDR shifts the system toward prolonged repayment, administrative complexity, and eventual loan discharge rather than affordability and predictability.

A more effective approach would reduce costs on conventional loans during the early years of repayment, when borrowers are most financially constrained. Lower interest rates or capped payments during the first several years after repayment begins would reduce dependence on IDR while preserving incentives to repay principal and limiting the need for large-scale forgiveness.

Financing such reforms would require reallocating existing subsidies rather than expanding total costs. Options include eliminating the tax deductibility of student loan interest, replacing some loan discharges with zero-interest treatment after a fixed repayment period such as 20 years, and making greater use of IRS-administered collection mechanisms, including offsets against tax refunds and certain credits. These changes would improve repayment efficiency while reducing both fiscal exposure and long-term household financial strain.

Taken together, the failures of both parties have produced a student loan system that is harsher than necessary, less durable than advertised, unevenly targeted toward the borrowers most in need, and an inefficient use of taxpayer resources, while remaining vulnerable to future retrenchment driven by fiscal pressures, legal challenges, and renewed inflation concerns. The result is a system poorly aligned with broader goals of household solvency, workforce development, and retirement security.

Private Retirement Savings

Unlike health insurance and student debt, private retirement savings policy is not an area of complete legislative paralysis. Republicans largely succeeded in enacting their preferred framework, and Democrats, in turn, achieved many of their stated objectives—but neither side has sustained a stable, durable policy regime. The core failure is less inaction than pendulum governance: shifting priorities, episodic attention, and reforms designed for short-term wins rather than long-term household outcomes. As a result, retirement policy oscillates between expansion and retrenchment without the consistent focus required to meaningfully improve participation, adequacy, or resilience.

Both parties have supported incremental reforms to rules and tax incentives governing private retirement savings, most notably through the passage of the SECURE Act of 2019 and SECURE 2.0 in 2022. However, these efforts largely reflect policy frameworks designed by and for the financial services industry, and they fall well short of addressing the needs of households most at risk of inadequate retirement savings. In practice, both parties have effectively delegated responsibility for retirement adequacy to the private sector while avoiding direct engagement with distributional and fiscal tradeoffs.

The SECURE Act of 2019 focused primarily on expanding access to employer-sponsored retirement plans and increasing plan flexibility. Key provisions included raising the age for required minimum distributions, encouraging the use of multiple employer plans, and expanding eligibility for part-time workers.

SECURE 2.0 built on this framework by introducing automatic enrollment for new 401(k) plans, increasing catch-up contribution limits, allowing student loan payments to qualify for employer matching contributions, and expanding tax incentives for plan sponsors. Together, these reforms were designed to increase participation and assets within the employer-based retirement system.

Despite their bipartisan support, these laws did little to improve outcomes for households struggling the most to save for retirement. Their benefits are heavily concentrated among workers with stable employment, access to 401(k) plans, and sufficient income to take advantage of tax-preferred savings vehicles. By contrast, workers with intermittent employment, lower wages, or no access to employer-sponsored plans saw limited gains.

A central weakness of this approach is its imbalance between 401(k) plans and Individual Retirement Accounts (IRAs). Policy enhancements overwhelmingly favor workers with employer-sponsored plans, while those relying on IRAs receive little additional support. Automatic enrollment and automatic escalation provisions were applied to 401(k) plans but not extended to IRAs, even though IRAs are the primary retirement vehicle for many self-employed, gig, and low-income workers. Similarly, while SECURE 2.0 allowed student loan payments to qualify for employer matching contributions in 401(k) plans, it provided no comparable enhancements for IRA savers.

The legislation also failed to provide meaningful direct support for low- and moderate-income households. Existing tax credits for retirement contributions remain limited in size, complex in design, and poorly targeted. There is no system of automatic government matching contributions for IRAs, despite clear evidence that matching incentives are more effective than tax deductions for households with limited tax liability.

Moreover, the SECURE framework does little to protect accumulated savings from leakage. Pre-retirement withdrawals from retirement accounts remain common and may increase as automatic contributions raise account balances without strengthening withdrawal restrictions. Job transitions remain a particular point of vulnerability. Workers frequently leave retirement savings in former employer plans with high fees and limited investment options, yet the legislation did not create automatic protections or default rollover mechanisms to safeguard balances during employment changes.

In aggregate, bipartisan retirement savings reform has expanded the reach and complexity of private retirement markets without materially improving retirement security for the households most at risk. By deferring to private plan design and industry-driven solutions, both parties have avoided confronting the reality that inadequate retirement savings are a structural problem tied to income volatility, health costs, and student debt. Without more direct support for IRA savers, stronger protections against leakage, and mechanisms that prioritize household solvency over asset accumulation, private retirement savings policy will continue to reinforce inequality rather than mitigate it.

Social Security and Trust Fund Solvency

There is a broad, if largely unspoken, bipartisan consensus to delay action on Social Security. Both parties acknowledge the long-term solvency challenge, yet neither has been willing to advance reforms on a timetable consistent with the projected depletion of the trust funds.

This delay is not driven by uncertainty about the problem but by the interaction of ideological commitments and political incentives that make early action costly and postponement rational. Republicans face internal resistance to revenue increases and reluctance to propose benefit adjustments that would affect current or near-term retirees, while Democrats treat Social Security as politically sacrosanct and avoid reforms that could be framed as benefit reductions. In this environment, delay becomes the equilibrium outcome, even as automatic benefit cuts draw closer and the scope for gradual, less disruptive reform continues to shrink.

Republican Failures

Republican thinking on Social Security is anchored by a strong and largely unified opposition to new taxes. Across factions, Republican policymakers have consistently rejected increases in payroll tax rates or expansions of the taxable wage base as acceptable solutions to trust fund insolvency. This position sharply limits the menu of viable reforms and forces the debate toward either benefit-side adjustments or optimistic assumptions about future economic growth.

Within those constraints, Republican views diverge in important ways. One faction has long favored diverting a portion of payroll taxes into private retirement accounts. Proponents argue that personal accounts would increase returns, reduce long-term reliance on Social Security, and strengthen individual ownership of retirement savings. However, this approach worsens trust fund solvency in the short and medium term by redirecting revenue away from the existing system while current benefit obligations remain unchanged. As a result, private account proposals require either substantial transition financing or deeper near-term benefit reductions, a tradeoff that is rarely confronted directly.

A second faction within the party places greater emphasis on trust fund solvency and overall budget discipline. This group is more skeptical of private accounts precisely because of their transitional costs and fiscal risks. Instead, they focus on slowing benefit growth through changes to benefit formulas, cost-of-living adjustments, or eligibility rules. These proposals implicitly accept that future retirees may receive smaller benefits relative to scheduled promises, particularly if no new revenue sources are introduced.

Overlaying both approaches is a recurrent belief that stronger economic growth could substantially alleviate the problem. During recent campaign cycles, several Republican figures argued that tax cuts, deregulation, and pro-growth policies would expand the workforce and wage base enough to stabilize Social Security without major structural changes. While higher growth would improve trust fund finances at the margin, this view tends to overstate the degree to which growth alone can offset demographic pressures and longevity trends already embedded in the system.

Some Republican candidates have been more candid about the scale of the challenge. Figures such as Nikki Haley and Chris Christie have acknowledged that future beneficiaries are likely to receive lower benefits than currently scheduled and that delay only worsens the adjustment required. This realism represents a meaningful departure from claims that growth alone can resolve the problem.

However, these proposals stop short of specifying a workable transition path. They do not clearly specify the exact phase-in strategy for the new benefits. Would the benefit reduction impact people who are currently 50 or 45? Nor do they outline the scale or design of private saving incentives required to offset lower public benefits during the transition.

Senator Rick Scott of Florida has taken a more explicit and unusually direct position on Social Security than most Republicans. His proposals have called for periodic reauthorization of federal programs, including Social Security, and for explicit reductions in future benefit obligations as part of a broader effort to restore fiscal balance. Scott’s approach reflects a clear recognition of the severity of the trust fund problem and the inadequacy of incremental delay. However, the lack of specificity around timing, cohort protections, and transition mechanisms has allowed his proposals to be portrayed as extreme.

Democrats have attempted—largely unsuccessfully—to elevate Scott’s position as representative of the broader Republican agenda during election cycles. These efforts have generated political messaging but little substantive debate, reinforcing a familiar pattern: explicit proposals are marginalized, implicit benefit cuts through delay remain unchallenged, and the underlying solvency problem continues to worsen.

Republican Social Security proposals reflect internal disagreement over mechanisms but convergence on constraints. The one common theme of Republican proposals is an absence of explicit support for new revenue for the Trust funds. Republican policymakers oscillate between private account proposals that exacerbate near-term solvency challenges and benefit adjustments that are politically difficult to advance.

Democratic Failures

Democratic approaches to Social Security reform have been dominated by an emphasis on benefit protection and expansion, financed primarily through higher taxes on upper-income earners. Most Democratic proposals reject benefit reductions outright and instead rely on expanding the payroll tax base, raising effective tax rates on high earners, or both.

Budget proposals advanced by the Biden administration reflect this approach. President Biden proposed applying payroll taxes to earnings above a high-income threshold while leaving benefits unchanged or modestly enhanced. These proposals would improve trust fund finances but would not fully close the long-term funding gap and were not paired with broader structural reforms capable of attracting bipartisan support.

Congressional proposals advanced by Senator Bernie Sanders and aligned progressive lawmakers go further by explicitly expanding benefits while simultaneously increasing taxes on high earners. These proposals include higher minimum benefits and more generous cost-of-living adjustments. While internally coherent, this approach increases total obligations and has proven politically polarizing.

Other Democratic lawmakers have pursued narrower, defensive measures rather than comprehensive solvency reform. Senator Michael Bennet and a small group of centrists have focused on protecting program administration and beneficiary access rather than advancing full trust fund solutions. While these efforts address near-term risks, they stop short of resolving long-term financing challenges.

By relying almost exclusively on revenue increases and avoiding benefit-side adjustments, Democrats have struggled to build bipartisan coalitions or enact reforms on a timeline consistent with trust fund realities.

Both-Party Failures

The cost of bipartisan delay is measurable. According to the Social Security Trustees Report and the Office of the Chief Actuary, restoring 75-year solvency today would require either an immediate and permanent payroll tax increase of roughly 3.6 percentage points or an across-the-board benefit reduction of roughly 22 percent. If policymakers wait until trust fund depletion in the mid-2030s, the required adjustment rises to more than a 4.2 percentage point payroll tax increase or benefit cuts of roughly 25 to 26 percent.

Delay therefore increases both the size and the concentration of required changes. By postponing reform, both parties implicitly choose larger tax increases or deeper benefit reductions in the future while denying support for today.

https://www.crfb.org/papers/analysis-2025-social-security-trustees-report

This arithmetic underscores the central theme of this memo: failures in health insurance, student debt, and private retirement savings suppress private saving and make Social Security reform politically and economically harder, even as delay ensures that the eventual adjustment will be more abrupt and more painful.

Conclusion

Republican policy failures share a common structure: an overreliance on tax cuts, market primacy, and assumed growth as universal problem-solvers. Those tools do not repair household balance sheets that are already impaired by medical cost exposure, debt burdens, and volatile employment-linked benefits. These policies raise household financial risk reduce the capacity of households to increase private retirement savings and make meaningful Social Security reform proposals less feasible.

Democratic failures reflect a different governing philosophy but converge on similar outcomes for households: policies that are expansive in aspiration yet fragile in execution. Democrats are more willing to use public spending, subsidies, and regulation to mitigate risk, but internal divisions between progressive and centrist factions consistently undermine durability. Progressives push for maximalist, universal interventions—debt cancellation, broad coverage expansions, aggressive benefit protections—while centrists prioritize fiscal restraint, targeting, and political defensibility. The resulting compromises often satisfy neither camp and leave programs exposed to legal, budgetary, and electoral reversal.

These tensions produce a governing pattern of temporary programs, sunsets, and executive-branch workarounds that struggle to survive court challenges, budget scoring constraints, or shifts in partisan control. In health care and student debt, households experience short-term relief followed by renewed uncertainty and recurring policy cliffs. Both parties have failed to advance needed reforms to Social Security.

The political system rewards contrast, messaging, and short time horizons, and it punishes durable compromises that require each party to disappoint part of its coalition. Republicans can oppose taxes and promise growth; The result is a stable two party political duopoly leading to worsening outcomes for households. Chronic policy failure is not an accident but the predictable product of a governing process that treats household solvency as secondary to coalition management.

Authors Note: Enjoyed this post? Also look at the ACA debate misses the real cost drivers and recent articles on student debt

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