January brings with it a lot of uncertainty and changes. Imagine relying on a monthly check to cover the necessities of life, from food to medicine.
And then you are told that this money will be reduced in the near future! This is the reality that millions of Social Security recipients in the United States face, and these programs are practically essential.
This is where President-elect Donald Trump comes in, who, despite not yet taking office, has proposed a plan that could reshape the system.
Who benefits from Social Security?
Last November 2024, approximately 52 million retirees received a Social Security check worth $1,900. Although it is not a large sum of money, it has proven to be a critical source of income for all former employees in this country.
Since 2002, between 80 and 90% of Gallup poll respondents have confirmed that they rely on Social Security to make ends meet each month. However, despite its importance to millions of users, Social Security is facing serious challenges that must be addressed by new leaders to ensure the program’s stability.
What is happening with Social Security?
As previously stated, it has served as a foundation for millions of Americans since its inception in 1935. However, the system is now on the verge of collapse, with the 2024 trustee report predicting that these funds for old-age and survivors insurance (OASI) will run out in 2033.
This would result in a benefits reduction of up to 21%. if appropriate measures are not implemented soon!
What are the reasons behind it?
A financial imbalance that has grown like a snowball for nearly four decades! The most recent report predicts a 23.2 trillion dollar deficit over the next 75 years, and while this reality is not new, what is alarming is the lack of political commitment to implement viable solutions, as no one has yet agreed to solve this problem.
It is important to note that the depletion of OASI asset reserves does not imply that Social Security is bankrupt or about to disappear, but rather that it is not sustainable at this time.
Trump and his controversial proposal:
In the midst of this landscape, newly elected President Donald Trump has made some remarks that have sparked widespread debate.
Trump stated in Truth Social that “retirees should not pay Social Security taxes,” and while many people were encouraged by his words, many experts and legislators expressed concern.
According to analysts, eliminating SSA taxes could increase the monthly expenses of nearly half of the beneficiaries, but it would also create a significant fiscal gap that should be considered, as the funds could only collect 944 billion dollars between 2024 and 2033 (the year in which the reserves are expected to be depleted), and, of course, eliminating this would cause the pension funds to be depleted much sooner.
According to experts in the field, this could result in tax increases for other sectors of the population in order to compensate for the loss and mitigate its effects by looking for a “substitute”.
Does this plan have consequences?
We already know that Trump wants to eliminate taxes and that no one likes having their benefits taxed, but this income is necessary for Social Security (which is only fed by the payroll tax on labor income, income from active reserves, and taxes on Social Security benefits), and Social Security is currently spending more than it collects; with this proposed plan, it would significantly increase expenses while collecting none.
What is needed to carry out Trump’s plan?
Trump needs 60 votes in the Senate to change the Social Security Act, which is unlikely because even if he gets all of the Republican senators to vote for him, he still needs seven Democratic senators to vote with him.
So, while the future of Social Security hangs in the balance, what is at stake is not just a government program, but the livelihoods of millions of Americans, which means that these decisions will not be made lightly, but will be thoroughly debated in Congress to find the best solution for everyone (and our future!).
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