Can Donald Trump Address Social Security's Major Issue by 2025?
Joe Biden and Donald Trump, both past and future presidents, share a commonality when it comes to Social Security retirements. They've each been eligible to collect their full benefits for over a decade. Also, neither leader pushed for drastic Social Security reforms during their initial presidencies.
However, Trump is set to have another opportunity to address Social Security's challenges. Could he tackle Social Security's primary issue in 2025?
What is Social Security's primary issue?
Let's first clarify a prevalent misconception regarding Social Security. The program is not on the brink of bankruptcy. For a program to be considered bankrupt, it must be unable to meet its financial obligations. This scenario is not imminent.
Instead, Social Security is running out of funds. Specifically, the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund are expected to exhaust their reserves. The projected date for the combined trust funds to run out of money is 2035, as indicated in the 2024 annual report published by the Social Security trustees.
Once the trust funds are depleted, Social Security will still generate revenue through Federal Insurance Contributions Act (FICA) taxes. Employees pay 6.2% of their wages towards Social Security, and employers contribute an additional 1.45% for Medicare. However, these contributions might not be sufficient to fund full Social Security benefits.
Does Trump have a solution for this issue?
Does President-elect Trump have a plan to prevent potential benefit reductions in the future? There's a hint.
At a December 2023 town hall with Fox News host Sean Hannity, Trump suggested, "You don't have to mess with Social Security." He continued, "We have resources underground far exceeding anything we can do by diminishing benefits for senior citizens with Social Security." Trump proposed tapping into the U.S. oil and gas reserves to address the nation's financial concerns, including Social Security's looming insolvency.
Although Trump's campaign did not provide specific details about this concept, the 2024 GOP platform stated, "Republicans will restore Fiscal Stability, ensuring the longevity of Social Security." However, once again, no concrete plans were provided.
The nonpartisan Committee for a Responsible Federal Budget, established in 1981 by former Democratic congressman Robert Giaimo and former Republican congressman Henry Bellmon, analyzed the potential impact of boosting federal land for domestic oil and gas drilling on Social Security. Their findings suggested that dedicating oil and gas leasing revenues to Social Security would only cover less than 4% of its funding gap. And even if all federal land were opened to drilling operations, Social Security's insolvency could not be resolved.
Another possibility is increasing federal taxes on domestic oil and gas production to help fund Social Security. While this approach could potentially address the issue, it might jeopardize Trump's pledge to reduce inflation since oil companies would likely pass higher costs on to consumers.
Confusing matters
Moreover, certain of Trump's proposals may exacerbate Social Security's primary issue. The Committee for a Responsible Federal Budget found that Social Security would deplete its funds three years earlier than forecast if Trump's plans to eliminate federal taxes on Social Security retirement benefits, overtime, and tips were implemented.
Additionally, Trump's plans to impose substantial tariffs on all imports could lead to higher inflation, resulting in higher cost-of-living adjustments (COLAs) and higher cash outflows from Social Security. Moreover, his proposal to deport millions of unauthorized immigrants would reduce the number of Social Security taxes paid by these workers.
In summary, it appears highly improbable that President-elect Trump will solve Social Security's primary issue in 2025. In fact, he might exacerbate it. But what about later in his second term? Politics can sometimes be unpredictable.
For example, in 1972, President Nixon, who was previously criticized as an ardent anti-communist, visited China. At the time, people wondered, "Only Nixon could go to China." Perhaps the president who will take the necessary steps to address Social Security will be the one who adamantly opposes interfering with it now.
After acknowledging that the projected date for Social Security's Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds to exhaust their reserves is 2035, one can ask: What strategies could be employed to secure enough funds for Social Security's future?
Following the discussion about President-elect Trump's suggestion to tap into U.S. oil and gas reserves to address fiscal concerns, including Social Security's looming insolvency, one could ponder: Is this a viable solution for securing retirement benefits, or would alternative financial strategies be more effective?
