Even though most people are focused on getting their monthly Social Security checks, decisions made in past elections have effects on the future of the program that helps them.
This election was definitely a roller coaster, with regular races and last-minute changes to the candidates. As a result, the candidates only had five months to run their campaigns. There was some doubt about who would win at first.
Still, now that it is official that former President Donald Trump will run for a second term, the question is how he plans to keep the promises he made before he left office.
What has Trump said regarding Social Security benefits?
Trump’s campaign has mostly been about protecting small businesses and opening up the US economy to other countries. His way of running the government is meant to bring in foreign money and help the American economy by cutting taxes and making the government smaller.
He supports the traditional market hand to control the flow of goods and services. His plans for the future of the Social Security Administration (SSA) show that he has the same goal.
It is well known that the SSA has had problems from different angles. One reason is that it does not have enough money for its daily operations because its budget has only grown by small amounts, less than the rate of inflation.
The other reason is that the Retirement Insurance Fund and the Disability Insurance Fund are spending their money on Social Security checks faster than they can be replaced. For at least 30 years, these two big problems have been going on.
Because birth rates have been going down since at least 1990, the budget has been tight, and it has been known since then that there are not enough funds to pay Social Security benefits. Now, the SSA is having operational problems that could mean it has to freeze hiring, limit its operational reach or customer service, and expects to run out of cash in 2035 to pay its benefits.
But what President Trump said about the Social Security System was a suggestion that was close to the heart of most people, not the system’s welfare and benefits. He has made it clear that he does not plan to cut benefits.
Instead, they can be raised by lowering the taxes that people on their income have to pay. This is a reasonable and appealing plan. It does not say anything about why Social Security benefits were taxed in the first place, though.
Income taxes were first put on Social Security benefits in 1983, when Congress agreed to them as a way to help the SSA’s insurance reserves.
It is very important to remember that the SSA system was meant to pay benefits by investing the money that workers paid in Social Security taxes and then paying retirees.
This pyramid-shaped model can not work as long as the population keeps going down, and the growing deficit will force it to spend the principal that generates those returns, which will create a vicious cycle of equity burn. So, cutting back on the money you get from taxes on retiree benefits will leave you with even less to keep the system running.
How can Trump make the Social Security benefits sustainable?
With the current tax reduction guideline and the chance of putting in place tariffs, the SSA’s future looks complicated. The tariffs will raise inflation and the CPI-W, which is used to figure out the annual Cost-of-Living Adjustment (COLA).
This will cause SSA’s insurance fund to drain faster. So, President Trump has more than one choice. One way is to raise taxes on Social Security to give more money to SSA. Two, to cut down on the number of new retirees by raising the age at which people can retire early, or three, to lower the amount of money that people will get from Social Security.
Any of them might go against what people in the working class want to hear about their retirement savings. But at some point, some sacrifices will have to be made. Still, the main goal of its campaign, which will always be supported, is to bring the American economy back to its former glory.
