Social Security’s primary trust fund will now be exhausted before the end of the next president’s term.
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America’s next president, and the class of senators elected this November, seem all but guaranteed to face the politically perilous task of addressing Social Security’s imminent insolvency before the end of their term. For that, they can thank President Trump.
On Tuesday, the program’s trustees confirmed that its Old Age and Survivors Insurance trust fund is now set to run out of money in 2032 — one year earlier than they previously projected. If policymakers fail to act before then, more than 70 million beneficiaries will face an automatic 22% benefit cut.
Why did the deadline for action move up? Largely because of Trump’s costly tax cuts. The president’s One Big Beautiful Bill Act created a large new deduction for seniors, which put a major dent in one of Social Security’s major revenue sources — the income taxes on benefits paid by higher-income beneficiaries. His restrictionist immigration policy has also reduced revenue coming into the program from payroll taxes paid by foreign-born workers.
Social Security had, of course, been running unsustainable annual budget deficits long before Donald Trump took office. But his actions ensured the clock will run out on this once-in-a-generation budget time bomb before the end of his successor’s first term, and likely when they’ll be in the midst of a re-election campaign.
Perhaps worse, Trump has made the bomb far harder to diffuse. Before his presidency, solving Social Security’s financial troubles — and indeed, those of the broader federal budget — seemed like a simple political math equation. Democrats largely preferred to close the shortfall with tax increases, and Republicans preferred to close it through benefit reductions. A solution would be found somewhere in the middle.
Trump changed the calculus when he ran for president on a pledge to do neither. He instead claimed Social Security could be saved simply by cutting fraud. Since then, he has neither enacted nor even proposed policies that would meaningfully reduce costs. Yet Republican lawmakers no longer champion entitlement reform the way they did when they were the party of Mitt Romney and Paul Ryan.
The other side of the aisle has responded similarly. Before the Trump era, President Barack Obama attempted to improve Social Security’s finances multiple times, going so far as to include a modest benefit reform in his 2013 budget proposal. But when he succeeded Trump’s first presidency, President Joe Biden spent most of his term rousing Congress against taking any action and ended it by signing legislation that actually worsened the shortfall. The most popular proposals from Congressional Democrats now rely on gimmicks that would do even more harm than good. At the same time, the party is seeking to outflank Trump with budget-busting tax cuts of their own.
By making both tax increases and benefit reform politically toxic in both parties, Trump has created immense political pressure for Congress to adopt the worst “solution” of all: a punt. Instead of fixing the trust fund, lawmakers could finance Social Security’s full benefits by giving it free rein to add to annual budget deficits in perpetuity. Doing so would undoubtedly be the path of least resistance, politically speaking.
But Trump’s actions have stacked the deck against his successor here, too, by swelling the national debt, which will make it harder to add more red ink without causing nasty consequences.
When Trump took office in 2017, the federal budget deficit equaled roughly 3% of gross domestic product (GDP). Now, in no small part due to his tax and spending policies, it is nearly double that. The national debt recently surpassed 100% of GDP earlier this year, and by 2032, it will be higher as a share of economic output than at any point in U.S. history.
Trump’s inflationary policies have already made it more expensive to service this debt. Last month, yields on 30-year Treasury bonds reached their highest level since before 2007. The federal government is already spending at least $1 trillion each year on interest payments — more than it spends on Medicare or national defense. The combination of higher interest rates on a higher stock of debt will send this figure soaring.
Many will shrug off these concerns after a debt crisis predicted by fiscal alarmists in the 2010s failed to materialize. Indeed, bond markets have been relatively patient with U.S. policymakers up until recently — perhaps they’ve been relying on the apocryphal Winston Churchill adage that “you can always count on Americans to do the right thing after they’ve exhausted all other possibilities” to be true. But what will happen if the leaders of 2032 choose to continue running up record-setting deficits even after they blow past the last action-forcing deadline on the horizon? If investors were to ever get spooked, it would be then.
Even in the absence of a full-blown debt crisis, “fixing” Social Security with more borrowed money likely won’t be painless. All else equal, ballooning America’s national debt should drive up the government’s borrowing costs and lead to higher interest rates for consumers, who would feel the pinch in their monthly mortgage and credit card payments. Perpetual deficit spending would also put upward pressure on demand and inflation.
Fortunately, some potential 2028 presidential candidates are clear-eyed about the fiscal challenge they will inherit from Trump. And there is no shortage of responsible solutions they can draw upon to strengthen Social Security for seniors who depend on it without imposing an undue tax or debt burden on working Americans. The question is whether they can overcome the populist allure of candidates who make implausible promises to leave Social Security untouched or even expand benefits without paying for them.
Let’s hope so, because America can’t afford another president who makes fixing Social Security their successor’s problem.
