The recent victory of Donald Trump as the 47th president of the United States means that there are some big changes headed for Social Security. Social Security, a vital source of income for millions of Americans, has been making headlines lately with predictions that the fund retirement fund is set to be depleted by 2035 unless swift action is taken. The election of Trump as president means that this depletion may come sooner than anticipated
Current state of Social Security
Social Security is a government-run program designed to provide financial support to individuals in retirement, as well as those who are disabled, survivors of deceased workers, or facing other life challenges. Funded primarily through payroll taxes levied on earnings, Social Security aims to ensure that workers can maintain a basic standard of living once they are no longer able to earn an income through work or to provide much needed monetary resources for those who cannot work due to disability or who have no access to any resources.
For the retirement program, it provides monthly benefits to eligible recipients, with the amount based on their lifetime earnings and the age at which they begin collecting. While Social Security is vital for many Americans, especially retirees, the program has been facing longevity challenges due to an increasing aging population and a shrinking ratio of workers to beneficiaries. As a result, discussions around its sustainability and potential reforms, such as adjusting the retirement age or increasing payroll taxes, have been ongoing.
According to financial experts, by 2035, the retirement fund is set to be depleted by 2035. While this does not mean that Social Security will cease to never exist, it does mean that if no reforms are made to current payments, future beneficiaries will only receive 83% of their entitled benefits. Up until now, suggested reforms to increase the longevity of the fund to prevent this from happening have been to either increase Social Security taxes or to reduce benefit payments.
Trump’s plans for Social Security
Part of Trump’s election campaigning involved pledging not to cut Social Security payments. This was a significant concern for many voters who found themselves stuck between a rock and a hard place. While reducing payments would mean that the integrity of the fund would be maintained, many if not the majority of Social Security retirement beneficiaries cannot afford to see a cut in payments within the current economical context we find ourselves.
In addition, Trump has planned to reduce taxes on Social Security payments. However, the Congressional Budget Office (CBO) has estimated that if such elimination and reductio of Social Security taxes was to occur, it could lead to a $950 billion reduction in revenue by 2035. This would put the fund under even more pressure than it already is and could lead to an earlier depletion date.
Future of Social Security remains uncertain
During Trump’s previous presidency term, he made proposals to cut Social Security taxes however this never made it into legislation. However, it remains unclear if he will be successful this time around. Increasing the longevity of the Social Security fund is becoming increasingly urgent, however, addressing these challenges by reducing payments or raising taxes for current beneficiaries is a difficult proposition in the current economic climate.
Seniors rely on Social Security as their primary and often sole source of income and any reduction in benefits could exacerbate financial insecurity for this vulnerable population. Similarly, raising payroll taxes would place a burden on both workers and employers and could potentially slow economic recovery or reduce disposable income, particularly as we find ourselves in the aftermath of the COVID-19 pandemic.
